AI Impacting the Insurance Industry
InsurTech companies are using artificial intelligence (AI) to capture more land in today’s digital world. AI has evolved over the years and has had far-reaching effects on most technology-based operations, including the insurance industry. The full insurance value chain enables AI insurers to use machine learning, data modeling, and forecast analysis. And the results are positive in the form of the increased bottom line and improved customer satisfaction. Read on to learn about the impact AI has had and will have on the new digital insurance industry.
The few Impacts of AI on the Insurance Industry
Understanding AI
AI makes machines intelligent. It is an umbrella term for a set of technological advances that have enabled humans to program machines to perform certain tasks. AI is very popular because of its ability to automate tasks performed by humans and complete them in a short period of time without fatigue or errors.
AI and Insurance
Like all other sectors, the insurance industry uses AI to streamline its operations, effectively engage with audiences and facilitate sales. AI has not only challenged legacy product taxes but has also supported InsurTech companies to acquire venture capital. First of all, AI has saved a lot of money for insurers and made the life of policyholders easier.
Usage-based Insurance
AI plays a key role in introducing behavioral pricing. The traditional model of insurance premiums based on statistical records has given way to analytical, individual-based data to determine accurate premiums. This is possible because of the Internet of Things (IoT). Its examples are – wearable devices, objects with sensors, sensors based on one’s location, and systems that record geographic data with the help of satellites.
Enhanced Customer Experience
Customers don’t like jargon, they want simplified information that adds value to them. AI-powered chatbots have come in handy to provide simple solutions to customers’ complex queries. Chatbots have evolved from integrating the famous ‘Frequently Asked Questions’ to identifying customers ’faces and selling their policies. For example, an insurance company offers life insurance based on a selfie! AI is also useful in fast-forwarding the claim process thanks to automation.
Efficient Underwriting
When the data volume is large, data analysis performed by AI scores better than human analysis. With AI applications, the underwriter can focus on the strategy and portfolio management aspect instead of manually scrutinizing the data. AI’s algorithms can perform difficult underwriting tasks more efficiently. Sometimes, a combination of AIs is used to achieve a robust underwriting scheme.
Reducing Fraud
Identity theft scams are common in the insurance industry. AI has the ability to detect gaps in the process of fraudulently claiming the claim process. Machine learning algorithms can scan through historical data to find out if something is missing. Some patterns can be highlighted and the result can be a warning against fraudulent activity. It is not realistic to expect such intensive inspection from the human eye, but the combination of the human eye and AI can do wonders.
Building Trust
Ultimately, what policyholders want is a faster claims process. The performance of an insurance company is judged by the customer after the claim is settled. One of the important metrics by which a customer evaluates an insurance company is a time it takes to settle a claim, and smooth claim settlement is paramount.
Trust plays a crucial role throughout the insurance process. AI should also resonate with trust within current and future policyholders. Policyholders shouldn’t see AI’s development also as a tool to deprive policyholders of an honest claim reimbursement; they should see it as a medium that facilitates it.
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