Many industries are using artificial intelligence (AI) and related technologies to optimize their processes. While this is easy to imagine in the manufacturing industry, traditional service industries are also following suit, many with exceptional results.
One of them is the insurance industry, which even has the term “Insuretech” for the software that is transforming its operations. Below we discuss how AI is helping insurance companies thrive.
In uncertain times, the right insurance can provide much-needed peace of mind. This has been proven by the massive growth of insurance companies over the past few years. Revenue from health and health insurance alone has grown 3% year-on-year since 2017. This does not even include property, auto and life insurance.
However, not all of this growth is due to people’s insecurity or even an increase in the population contributing to income. In many cases, this can be explained by how the sector has streamlined and improved operations with the help of AI. Individual companies that use these improvements are really reaping the benefits. Far-sighted providers such as Honeycomb Insurance have even managed to expand into new states. This company moved to Georgia, its 9th state of operations, and managed to raise $15 million at the beginning of the year alone.
In the past, underwriters relied on eyewitness testimony, usually from the applicant, to assess risk. The problem is that people often misremember or may deliberately misremember. This results in bloated paper trails that devour resources and labor.
The Internet of Things exists in connected devices, from fitness trackers to recorders in our cars. Of great help, all this information can be processed by artificial intelligence algorithms. Able to scan them faster than agents, they allow insurance companies to reach settlements much faster.
A more accurate estimate means fairer premiums. This can increase competitiveness in an industry where price is everything. Seizing the opportunity for personalization means personalized policies for businesses and consumers. For example, companies such as Honeycomb Insurance have been pioneers in this area for some time now. Specializing in real estate insurance, they create people-centric and technology-based insurance policies. This simplifies the process and can lead to more accurate pricing.
Digitization of documents
Technology is also accelerating operational efficiency to further reduce the number of insurance documents. Optical Character Recognition (OCR) is a system that recognizes handwritten characters and then converts them into digital documents. Administrator assistants no longer need to type written text to add it to digital systems. It can also go further by extracting data from photographic identification.
The insurance industry has long been a haven for fraud, and unscrupulous people believed they could trick companies into paying for deliberate actions. Some of them are obvious, others are harder to prove, and huge profits are lost every year due to insurance fraud. Although it has improved, fraud detection using technology can help make it a thing of the past.
The AI does this by detecting familiar patterns in fraudulent activity. Some algorithms now have accuracy rates up to 75%. They can flag violations in claims as well as conduct cost estimates. Of course, AI here can only be considered successful if it can update these processes itself. Criminals will always find ways to change their behavior to trick the system, so systems will have to adapt accordingly. But with $40 billion lost annually to insurance fraud, there’s a lot to be gained.
Future of Insuretech
By no means is AI a panacea. Insurance and its requirements are so unique that it is easy to understand that they will always need a human eye. However, these systems can simplify processes. They can reduce insurance companies’ losses of money, either through fraud or by paying out claims that are higher than they should be. However, this will also have an additional benefit to the consumer, who will receive more competitive individual rates.
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