If someone asked you to list the top 10 technologically cutting-edge, forward-thinking industries aggressively adopting digital transformation, chances are “insurance” would not be among them.
Insurers—health, property, liability, life, automobile, etc.—are traditional entities. Many types of insurances are tightly regulated and have limited flexibility. And there’s a good deal of inertia at many insurance companies. Why change business practices that have worked for decades?
But the times are a-changing, and insurance companies are seeing the advantage of adopting new technologies: big data, the internet of things (IoT), and cognitive technologies such as AI (artificial intelligence).
Let’s look at 3 current insurance-industry practices that are ripe for digital transformation:
1. Claims processing
Processing insurance claims is labor-intensive. From the time a client files a claim, one or more humans are involved every step of the way. Claims adjusters often travel to inspect damage and estimate repair costs. If there’s a dispute, even more people get involved.
2. Fraud prevention
One reason claims processing is so labor-intensive is someone must determine if the claim is fraudulent. There are some “red flags” insurance companies look for to identify potential fraud, but they still investigate each one. Sometimes they decide it would cost less to settle.
3. Product offerings and pricing
The insurance industry is based on averages. Insurers look at average risk levels for clients in certain geographic areas, age brackets, and income levels. They design products, services, and pricing for the average.
Although this works reasonably well for the insurers, it means some customers pay too much while others pay too little. Their actual risk profiles may be above or below average. Some customers have more insurance (or less) than they need because there are no insurance products designed specifically for them.
Enter: Artificial Intelligence
The insurance industry is ripe for a technological renaissance because many insurance companies are waking up to the fact that modern technologies can increase revenues and reduce costs. Leading the pack are cognitive technologies and artificial intelligence. By some estimates, those applications have a potential annual value of over $1 trillion to the insurance industry.
Here are 3 areas in which AI can benefit insurers:
- Customer service – As other industries have discovered, virtual customer service agents can perform natural-language processing. This can manage many common types of customer inquiries, enabling humans to focus on more complex issues.
- Fraud detection – Properly designed AI algorithms are very good at spotting patterns in data. Artificial intelligence can identify fraudulent claims much more accurately and consistently than human analysts. This means humans don’t waste time investigating legitimate transactions.
- Sales – Big data coupled with AI can enable insurance companies to customize product offerings that are based on individual risk profiles and priced accordingly.
How soon will insurance companies fully adopt cognitive technologies? It’s hard to say, but the value and competitive advantage to be gained by adopting these technologies are quite compelling.
It won’t be long before insurance companies start offering customized insurance products priced fairly for your lifestyle, benefitting both insurers and customers, thanks to artificial intelligence.