AI-Induced Technological Shift in the Insurance Industry

By Abel Travis, VP, Underwriting and Product Innovation, AF Group

Abel Travis, VP, Underwriting and Product Innovation, AF Group

Rising AI Trends in the Insurance Industry

From product development to underwriting to claims, artificial intelligence (AI) is fundamentally transforming the insurance industry. AI-powered innovations are providing further impetus to the insurers while enriching the entirety of their business workflow. The high-grade technology is helping the realm transcend from a ‘detect and repair’ model to a ‘predict and prevent’ model while bringing about a monumental technical shift.

Currently, a lot of insurers are leveraging AI(Artificial intelligence) to predict and understand customer behavior. Explosive growth in the devices and channels that customers use to interact with the companies are, in turn, escalating the available consumer data points. Businesses are harnessing this data and converting it into actionable insights with the help of AI and big data analytics. At the same time, AI and behavioral learning are also seamlessly dwelling into the claims adjustment process, which is tangled and stalled with unstructured data. Unlike human claims adjusters, AI can swiftly streamline the enormous amount of unorganized information, understand and interpret it, and identify trends. Not only does this mean AI systems can settle claims faster, but it is a clear indication that adjusters can spend most of their time optimizing indemnity and customer service. In addition, leveraging AI and its subsets such as natural language understanding (NLU) and deep machine learning is helping insurers to comprehend the contextual information from the streamlined data.

Challenges in Implementing AI

Amidst the growing popularity of AI, there is an uprising concern that algorithms are only as good as the data that is fed into them. Therefore, developers and companies relying on data and algorithms are treading on thin ice to ensure the datasets remain free of bias. The algorithms are created by individuals who have conscious or unconscious preferences that may go undiscovered until the algorithms are used. Consequently, the outcome might not drive the expected result. When you give computers the wrong information to work with, the results that come up are unlikely to be helpful. We, as an industry, must ensure that we hit head-on in combating this challenge, since leveraging AI is becoming more ubiquitous.

Identifying the Right Solution Provider

At AF Group, the paramount aspect we look into before inducting a vendor is their capability to understand the subject matter that we are trying to assess and create a solution. We were driven to this line of judgment because we faced significant drawbacks while working with a solution provider hailing from the healthcare industry. The focus was to develop a solution to tackle the unstructured claims data. Unfortunately, the vendor lacked the necessary know-how surrounding the insurance industry, and we had to train them to understand the nuances within the property and casualty (P&C) division. Besides, we were pushed to streamline our data in a way that easily blends with the solution model, which is built by the vendor, to synthesize the information. However, all the efforts made attained failure as the solution provider did not possess the subject matter expertise. Which is why it is of utmost importance to make sure that the vendor understands the industry and the associated data. Otherwise, there is a high chance you might wind up 180 degrees apart.

"AI is helping the insurance realm transcend from a “detect and repair” model to a “predict and prevent” model"

In workers compensation, we are looking to improve our services and make sure that employees receive their health back up quickly. To accomplish this feat, we are seeking vendors who possess workers compensation data that pertain to our specific use cases. For instance, we are currently trying to comprehend high-speed auto accidents resulting in severe bodily injuries, which in turn drive a significant amount of expense for additional care. If there is a vendor with proper workers compensation data that we can append with our internal information, it will help us get a broader and clearer view of the industry. Consequently, we will be able to make informed decisions through the results exhibited by the model, as the data fed is much more robust.

Future of AI in the Insurance Sector

The insurance landscape will continue to linger on the effects of computer visioning. This is because of the grueling experience insurers are facing with the traditional business models, which take more time to settle a claim and other insurance processes. In the long term, companies will adopt image recognition techniques that offer real-time damage assessment and provide a recommendation regarding cost required to rectify the damage in totality.

That being said, even though AI-based chatbots can provide consistent, accurate answers all the time in a way that humans cannot do, they have limitations in terms of emotional intelligence. This is where employees are still required to maintain customer relationships. However, more recently, there is the development of the human-AI hybrid model, which will help chatbots understand the context of the claim and offer empathy to customers to an increased level, compared to an AI model alone.

Embrace the Change

Back in 2004, when I started my career in the insurance industry, the landscape had a completely different makeup. Since then, the industry has undergone seismic transitions. Alongside, the surge of insurtech has drastically altered the dimensions of the industry’s workflow and value chain.

In this continually shifting insurance landscape, it is cumbersome for insurers to attain success by following the old methodologies that were triumphant a few years back. Hence, it is time we flip the dialogue from a problem statement to an opportunity statement. The only way to do this is by embracing the change and participating in it. I have firmly believed this, and it has fueled my success for the past 15 years. Hence, insurers that capitalize on the change will emerge as industry leaders, and ones that don’t will find themselves lagging.

Weekly Brief

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