Despite often being at the leading edge or forefront of significant technological movements, the insurance sector isn’t known for being the most progressive in adopting brand-new technologies. But with the rise of more advanced algorithms for machine learning, underwriters can better assess risk, offering tailor-made and premium pricing with insurance product personalization. Moreover, artificial intelligence or AI streamlines workflows and processes better to connect carriers with applicants efficiently and with minimal mistakes.
With the rapid change, AI is no longer a mere luxury but a necessity for insurers, especially for legacy providers. Here are some reasons why artificial intelligence is the insurance industry’s frontier.
Historically, most insurers depend on the information applicants submit to assess the insurance risks. Of course, the problem is that they can make mistakes or be dishonest with the details they provide, rendering the assessment more or less inaccurate. Through machine learning, specifically natural language and understanding or NLU, insurers can tap into more abstract information sources to better evaluate the risks associated with the client.
The ability to look into the textual sources of data and draw out the relevant information can be improved upon by using NLU. And with a more precise risk assessment, it’s possible to deliver appropriate premiums. Because it’s an industry where price carries greater weight than the products, having more personalized exposure models can go a long way.
Fraud is always a concern for insurers, and artificial intelligence is one of the best tools to combat fraudulent claims, as it can detect patterns that may escape the cognition of humans. Many companies have begun to incorporate technology for their fraud prevention efforts due to the volume, speed, and accuracy with which it can process claims. The machine learning algorithms can also provide details regarding suspicious claims, including cost assessment and procedures to enhance and resolve protection.
Minimizes human error
The insurance industry’s chain of distribution is complex and winding. And it’s not uncommon for many middlemen to examine the information and details between the carrier and the insured. As a result, it can lead to many mistakes that may slow down the process. Fortunately, artificial intelligence can resolve this problem. Their algorithms can reduce the time it takes to process claims and instances of errors, as they can evaluate them with greater accuracy. They also don’t get tired, like humans.
Even in industries that are as resistant to change as insurance, excellent customer service remains paramount. With AI-powered tools like chatbots, insurers can address user concerns and guide consumers through their queries without any human intervention, saving the customers and carriers time and resources.
While the insurance sector’s utilization of AI is still in its infancy, companies have already started to incorporate technology into their operations, though it isn’t always easy to see why. Beyond minimizing human errors and improving their fraud detection efforts, it also enables them to deliver more personalized experiences and products.