Artificial Intelligence (AI) is ever changing as it is still in its developing stages, and is projected to grow into a $58.3 billion industry in 2021 according to MarketsandMarkets. AI is known for its dominance in image and speech recognition, navigation apps, smartphone personal assistants, and ride-sharing apps.
AIs initial impact on the insurance sector will be to improve efficiencies and to automate customer-facing underwriting and claims processes. Once this has been done, AI is projected to identify, assess, and underwrite emerging risks and identify new revenue sources. It would also be able to cover fraud detection and prevention, personalized offerings and customer churn reduction. For insurance professionals and companies to use these benefits optimally, they should understand the prolific influence of AI on the insurance sector.
AI, as well as advanced analytics, will provide the hyper-personalization of new products and services. AI allows new and improved features to constantly be added onto a product or service because of its modular view. For example, data from health and fitness trackers, may be utilized by AI to provide customized insurance offers to clients.
This usage-based insurance (UBI) is different to what clients have experienced and what they expect because the offering is based on individual and current behaviors, instead of collected statistics and past trends. The customized offering will prove to attract all walks of life, seeing that it may be customized to suit anyone’s needs and wants.
Sales and Marketing
Customized insurance offerings, in turn, allow insurance companies to utilize customized marketing. By combining customized offerings with customer intelligence, insurance companies would be able to successfully target their target markets. This would enhance the efficiency of the consumer-focused sales journey. This will provide a plethora of opportunities for insurance professionals. To reap as many benefits as possible, insurance professionals should obtain a Property and Casualty license.
Insurers need to keep in mind that clients expect communication from their insurance providers. According to a study by Deloitte, 57% of insurance customers prefer to hear from their providers at least semi-annually, while only 47% receive that communication consistency. This expectation by insurance clients may be met by AI, which would be able to automate the communication process.
Pricing and Underwriting
Seeing that insurance products will be customized to suit the clients’ needs, the pricing and underwriting of these policies will have to be customized as well. Traditional insurance pricing models are often based on simple matrix systems, which may prove to be ineffective because it may lead to high exposure risk and large loss ratios. This approach to pricing would have to be replaced by a bottom-up approach. This approach uses internal data and combines it with external data assets, such as economic, crime rate, credit, traffic and weather data.
Property and casualty insurers are now able to use geospatial data, previously known as geographic information systems (GIS), as a data source. The insurers who have obtained their property and casualty license, would be able to perform a detailed analysis of a property using machine learning and computer vision solutions to provide more accurate and faster pricing.
Insurance claiming is a complex process seeing that it has to follow many different processes and different departments within the insurance company. Data generated will provide information on how to optimally route claims within departments or even how to automatically complete the claim based on its severity and complexity. But, fraudulent claims still do form between 5%-10% of insurers claim costs. AI is able to reduce this by implementing the use of intelligent automation tools to reduce fraudulent payouts.
Data has become an important tool, not only to insurance companies, but to all companies across all industries. When insurance companies transform and become data driven, they would be able to provide an innovative, simplified and improved customer experience all while being able to streamline the internal processes.
To become a data driven company, they would have to implement methodologies that put data at the center of decision-making. When doing so, insurance companies need to keep in mind that the customer experience is most important. They would also have to aim to reinforce a proper data culture throughout the company. By combining data and AI in decision-making processes, insurance companies will be able to provide optimal offers for their clients.
The bottom line
AI has led to disruptive changes in the insurance industry. For insurers to be successful and be strong competitors in their industry, they would have to be AI-based carriers which harness the benefits of AI to create products suited to the needs and wants of clients. Insurance companies should always keep in mind that AI does not have to be a threat to their business. The technology should be used to create opportunities within their industry to create a space for the insurance company to thrive.