Artificial intelligence has the potential to disrupt the insurance sector, which might have repercussions.
By Johan Steyn 13 September 2022
The insurance industry has largely been slow to evolve over the past decades. It shows a high-risk aversion and prefers to observe the effects of new technology on other industries before adopting them.
Insurance companies are carefully embracing the digital age. New machine learning algorithms help underwriters to include more data points in their risk evaluations, enabling them to offer clients more personalised premiums. Smart automation is accelerating the insurance application process by linking applicants with insurers more quickly and with fewer errors.
Carriers must adapt their operations to the changing market conditions caused by the broad deployment of artificial intelligence (AI). Executives in the insurance sector would do well to familiarise themselves with the potential effects of AI on claims, underwriting, and pricing. Armed with this information, they can begin establishing the talent, culture, and perspective required to succeed in the future insurance industry.
The insurance market is seeing a change in consumer behaviour. Traditional insurance policyholders were accustomed to receiving a response within a few days. They mostly viewed the pricing as acceptable and the quality of service as adequate.
As a result of advancements in other industries, consumer expectations for customer service have grown. Customers want customised products from businesses. They seek information that is relevant, readily available, and contextual. Additionally, they expect to have access to services whenever and however they choose.
AI strengthens client interactions by analysing past data such as consumer activities, demographics, psychographics, and geolocation. Since AI can predict how customers will respond to data, it can aid in the development of products that is more likely to elicit the desired response from the intended audience.
As a result of technological advances, insurance companies and their clients can now engage in dialogues that extend beyond the annual policy renewal and claims reporting. Agents selling insurance may spend up to 40% of their time on paperwork. This is the driving force behind the digitalisation and automation of virtually human-free activities using AI.
Recent advances in machine learning enable the insurer to rapidly evaluate the claim’s scope and determine fees. The examination of files, photographs, and sensor data assists insurers in assessing claims.
Conversational AI chatbots simulate human dialogue to do simple tasks, such as evaluating billing information and responding to frequently asked questions. Using chatbots that serve as virtual assistants, improved customer support is offered around the clock for tasks such as claims processing, underwriting, fraud detection, and general customer service concerns.
Interactions between customers and insurance providers will become less time-consuming and less expensive. If insurance can be tailored to a person’s unique needs, they will acquire it at more affordable prices. Flexible insurance, such as on-demand pay-as-you-go insurance and premiums that automatically fluctuate is already the norm for insurers who apply AI technology to the mountain of data they possess.
AI has the potential to disrupt the insurance market, which might have repercussions for both providers and policyholders. New technological market entrants pose the greatest threat to well-established insurance carriers.
Moreover, insurtechs and technology companies will continue to revolutionise client experience with innovations such as risk-free underwriting, instant purchasing, activation, and claims processing.
• Steyn is on the faculty at Woxsen University, a research fellow with Stellenbosch University and the founder of AIforBusiness.net