Top Four Opportunities for Artificial Intelligence in Insurance

The insurance industry is experiencing a period of disruption and accelerated change. Insurers have had to navigate the complexities of a global pandemic; manage an increase in the frequency and severity of weather-related events such as hurricanes, wildfires, and floods; and cope with an uncertain economy and geopolitical unrest.

At the same time, there’s been a shift in customer expectations towards more personalized and on-demand insurance products. This has led to the rise of InsurTech startups catering to these needs, creating a much more competitive landscape. Added to this are new regulatory changes and compliance requirements around data protection and cybersecurity that continue to reshape the industry.

These challenges have highlighted the importance of technological innovation and digital strategies for insurance companies. Which is why artificial intelligence (AI), machine learning, deep learning, and other advanced analytics solutions are gaining popularity, and insurers are turning to them to help improve operations, reduce risk, increase security, ensure resilience and agility, and elevate customer service.

The Impact of AI on Insurance

AI is changing the game for insurers, fostering a data-rich environment and facilitating a shift from “detect and repair” to “predict and prevent.” And the impact can be felt everywhere — risk assessment, fraud prevention, underwriting, claims handling, operational efficiency, and customer service. Insurance organizations are starting to employ AI innovation across all these areas to automatically assess historical data, customer behavior, and external factors to optimize pricing strategies and enable quicker, more informed decisions.

Insurance will shift from its current state of “detect and repair” to “predict and prevent,” transforming every aspect of the industry in the process. The pace of change will also accelerate as brokers, consumers, financial intermediaries, insurers, and suppliers become more adept at using advanced technologies to enhance decision making and productivity, lower costs, and optimize the customer experience.

McKinsey

AI is also revolutionizing traditional manual systems and processes and dramatically improving operational efficiency. This results in quicker claims intake, automated assessments, and data-driven decision support that ultimately leads to enhanced satisfaction.

AI’s predictive analytics capabilities can also empower insurers to anticipate and mitigate risks, supporting a proactive approach to claims handling. This not only improves the efficiency of the entire claims lifecycle and minimizes loss, it also enables insurers to quickly adapt to evolving risks more effectively, especially in the face of factors like more extreme weather and catastrophic events.

And AI is transforming customer engagement, providing 24/7, personalized support that guides customers through policy inquiries, claims reporting, and other interactions. This not only improves response times but also allows insurers to offer more tailored and responsive services, improving customer retention and strengthening relationships.

4 Transformative Ways Insurance Companies Can Use AI

To make the most of the benefits of AI-driven solutions, insurers need to understand the unprecedented opportunities for innovation and efficiency it can present for the organization. From our expertise in AI solutions and years of working with insurance companies, we’ve compiled a list of the top four ways AI can be used to reshape your insurance business. Take a look!

1. Mitigating Risk & Fraud

AI can significantly enhance risk and fraud management for insurance companies through advanced algorithms and predictive analytics. It can contribute to more accurate risk assessment by analyzing volumes of data to identify patterns and correlations that might not be visible through traditional methods. Machine learning models can assess longitudinal data, customer behavior, and external factors to create dynamic risk profiles. This allows insurers to better understand and price risks — ensuring premiums are reflective of the actual exposure — and helps in optimizing underwriting processes for more precise decision-making.

AI can also play a pivotal role in fraud detection and prevention. Through real-time analysis of claims data, AI algorithms can identify anomalous patterns and inconsistencies that may indicate fraudulent activities. This includes detecting unusual behavior, mismatched information, and suspicious trends in claims submissions. By automating the detection process, AI not only expedites the identification of potential fraud but also minimizes false positives, allowing insurers to focus on legitimate claims. This approach not only safeguards insurers against financial losses due to fraud but also enhances operational efficiency and customer trust by ensuring a fair and secure claims environment.

“Insurance fraud costs the industry $40 billion annually and contributes significantly to higher consumer premiums.”

Yahoo Finance

2. Expediting Claims

AI can bring significant improvements to claims management for insurance companies, streamlining processes and enhancing efficiency. AI expedites the First Notice of Loss (FNOL) process by automating claims intake. Through natural language processing (NLP) and machine learning, AI systems can swiftly categorize and extract relevant information from various sources, such as emails, forms, and customer calls. This accelerates the initial stages of claims reporting, ensuring quick and accurate capture of essential details.

AI can also contribute to faster claims processing through automated assessments and decision support. Machine learning algorithms analyze claim data, historical records, and policy information to provide adjusters with data-driven insights. This assists in determining claim validity, severity, and appropriate courses of action. AI-driven decision support not only speeds up the evaluation process but also enhances accuracy, making sure claims adjusters always have the necessary information and recommendations to make well-informed decisions.

AI’s role in claims management reduces manual effort, accelerates processing times, and improves the overall customer experience by ensuring swift and fair resolutions.

“Using AI to evaluate claims can reduce the processing time from several days to hours or even minutes.”

Forbes

3. Improving Operational Efficiency

AI can enhance operational efficiency for insurance companies across various aspects of their business processes. In underwriting, AI-driven automation streamlines the evaluation of risk profiles by swiftly analyzing the data. By leveraging machine learning algorithms, insurers can assess information, customer behavior, and other factors to make quicker and more accurate underwriting decisions. This not only speeds the policy issuance process but also ensures premiums align with the actual risk exposure, contributing to more efficient underwriting operations.

For customer service and communication, AI-powered chatbots and virtual assistants can improve efficiency by managing routine inquiries, providing policy information, and guiding customers through simple claims processes. This not only frees human agents to focus on more complex and higher value tasks but also ensures customers receive immediate responses and support, contributing to a more streamlined and responsive customer service experience.

The bottom line is AI-driven automation in underwriting and customer service significantly improves operational efficiency for insurance companies, enabling them to handle tasks more swiftly, accurately, and with enhanced customer satisfaction.

 “AI implementations could increase productivity in insurance processes and reduce operational expenses by up to 40% by 2030.”

McKinsey

4. Enriching Customer Engagement & Relationships

AI can bring substantial improvements to customer engagement for insurance companies, helping elevate satisfaction. Through the deployment of AI-powered chatbots and virtual assistants, insurers can provide immediate support to customers 24/7 — something today’s customers demand and expect.

AI can also help insurers deliver personalized and proactive customer experiences. By analyzing customer data, AI systems can anticipate individual needs, preferences, and potential issues. This allows insurers to offer targeted product recommendations, personalized policy options, and timely notifications related to policy changes or upcoming renewals. Through these personalized interactions, insurers not only strengthen customer relationships but also demonstrate a commitment to understanding and meeting the unique needs of each policyholder.

AI-driven improvements in customer interactions contribute to a more responsive, efficient, and tailored service that enhances overall customer satisfaction in the insurance industry.

 “56% of businesses use AI for customer service purposes.”

Forbes

How to Bring AI to Life

Insurers can best position themselves to leverage the opportunities of AI by fostering a culture of innovation and investing in a modern, cloud-based technological infrastructure. This allows systems to effectively harness the power of critical business data, automation, and analytics and helps the company embrace a data-focused, digital mindset.

Prioritizing customer-centric applications of AI — such as personalized services and efficient claims processing — can be a great first step for most insurers as they enter the era of AI. Also, be sure and monitor industry trends, regulatory considerations, and advancements in AI technologies to remain agile and adaptable in such a rapidly evolving landscape.

Not all insurance companies have the technical resources in-house to navigate AI-powered solutions. This is why consulting with an experienced partner can help insurers embrace AI and unlock its full potential for operational efficiency and strategic growth.

Let Hitachi Solutions Be Your AI Guru

Whether it is to deal with the effects of climate change, combat fraud, or improve efficiency, leading insurance companies are moving fast to find new and effective strategies to remain profitable and competitive. With our expertise and unique ability to innovate, Hitachi Solutions can help you do the same.

As a long-time premier Microsoft partner with the technical and industry skills to bring AI to life for insurance companies, Hitachi Solutions is ready to help you explore AI for improved underwriting and claims management, operational efficiency, and enhanced customer service. And we are committed to responsible AI development to ensure our solutions are not only effective but also ethically grounded. So, you know we are the trusted and dependable partner you can count on.

Contact us today, our AI experts are on-hand to guide and advise you on your AI journey.