AI is set to become a major disruptor for the insurance industry.
A forensic doctor takes a blood sample from a woman during a day of DNA collection in Sogamoso, Colombia, August 16, 2017. Picture taken August 16, 2017. REUTERS/Julia Symmes Cobb
AI is set to become a major disruptor for the insurance industry.
With its capacity to analyze and connect huge volumes of data in seconds, AI has incredible potential to enhance any computer-processed service offered today.
And data is the bedrock of the insurance industry.
Traditionally averse to new technology, insurance is poised to transform itself through AI.
As one of the largest industries in the world, the sector annually collects more than USD1 million in premiums, and comprises approximately 7,000 companies in the US alone.
But fraud threatens the industry more than ever before.
According to FBI estimates, insurance fraud costs every the average family in the US between USD400 and USD700 every year in increased premiums.
In Europe, fraud is estimated to represent nearly 10% of all claims, according to the European Insurance and Reinsurance Federation.
These high fraud levels have engendered distrust in the broader public.
An IBM poll in 2015 found that barely 43% of insurance customers trust the industry. Furthermore, this survey noted that distrust has consistently hovered around 50% since 2007.
Regaining confidence is a must for insurance firms, and AI technology is uniquely placed to make this happen.
Instead of a salesman deciding which policy best suits a potential customer, this process is increasingly being calculated algorithmically using AI technology.
This kind of automation not only makes the process more efficient but also has the potential to prevent instances of fraud.
According to an Accenture report, 74% of the insurance customers responded that they are open to receiving computer-generated advice on what’s the best insurance product to buy.
“Instead of interacting with only one person at a time like a human representative, an AI system can interact with an infinite number of people at once,” noted the report.
AI can interact with customers across different interfaces and communications platforms to develop a consistent brand experience, while tailoring services offer to a client’s specific needs.
And firms are already aware of this huge transformational wave.
Approximately 75% of the insurance executives surveyed by Accenture noted that artificial intelligence will significantly alter the industry by 2020.
Major insurance players are considering the numerous possibilities offered by AI, including partnerships with much smaller insurtech startups that have developed innovative products to help them.
AI can also simplify and expedite the claims process.
France-based AXA, for instance, revealed in February that it signed a partnership with Brolly, a startup, to use its AI software to improve the end-to-end claims process on a new car insurance product.
The service also helps customers select the best insurance plan for their needs.
This AI-driven model will eventually lead to cheaper insurance, allowing firms to reduce prices and ultimately benefit end-users.
The increasing prevalence of the so-called Internet-of-Things (IoT) will also provide personalized data based on customers’ behavior.
For example, people who are better drivers could be offered cheaper car insurance, and those with healthier lifestyles will be less likely to have to pay a premium for health coverage.
Among emerging economies, Colombia, where much of the health sector rests in private hands, is expected to play an important role in shaping the implementation of AI in the insurance industry.
With the health industry representing nearly 7.2% of Colombian GDP, according to the World Health Organization, it is a critical element of the economy.
Insurance companies in Colombia are among the largest in Latin America, and as such are seen to be at the forefront of AI investment in the sector.
Grupo Sura, one of the largest firms in Colombia, recently announced that it is going to invest USD145 million in AI and robotics.
In Latin America as a whole, these new technologies will increasingly allow firms to cater to the uninsured, as the combination of lower prices, tailored service, and rewon trustworthiness comes into play.
