Developments in artificial intelligence (AI) are already changing many fields, including healthcare, finance, education, transportation, and entertainment. AI is expected to play an increasingly important role in shaping the future of technology and society. What impact can artificial intelligence have on the insurance industry?
what was written about in the fantastic novels of the 20th century, became a reality – machines learned to understand human language, recognize drawings, surpassed people in the field of mathematical forecasting and analytics. For example, the ChatGPT AI chatbot specializes in conducting dialogues with the user, and it does it surprisingly well. Other intelligent algorithms draw or write programs, and this is far from all they are capable of.
Artificial intelligence systems use algorithms and statistical models to analyze and interpret large amounts of data, and they can learn and improve their performance. At the moment, AI has some limitations, in particular, it does not have empathy, it is difficult to use basic human common sense, it cannot create something entirely new, although it is good at developing new combinations based on existing ones. Artificial intelligence can make decisions based on data, but it lacks the judgment and decision-making skills that humans possess, especially in complex and unpredictable situations.
A plot from the future
What might insurance look like in the future? The article “Insurance 2030 – The impact of AI on the future of insurance” presents a hypothetical example of Scott’s customer experience living in 2030.
Scott has a meeting scheduled in town today. His robot car is already waiting, but the man decides that he wants to drive himself. Scott’s personal digital assistant plans a route and shares it with the insurer. He immediately sends an alternative route, which is less likely to cause accidents, and also adjusts the monthly premium. This trip may increase your car insurance premium, but will depend on the route you take and the number of other cars on the road. The additional payment is automatically debited from Scott’s bank account. When he stops at his destination, he accidentally hits a parking sign. The internal systems of the car determine that the driver is not injured and can go to the scheduled meeting. The car independently assesses the degree of damage. Photo and video recording of the front bumper and the scene of the accident is also carried out automatically. All data are immediately sent to the insurer. When Scott returns from the meeting, the dashboard screen informs him of the extent of the damage and confirms that the claim has been approved. The replacement car will arrive in 5 minutes. The damaged car will then be sent for repair.
Of course, this scenario now looks like a plot from a fantasy movie, although all the necessary technologies already exist, and many of them are available to consumers. In particular, telematics and on-board computers in cars, smart home assistants, Internet of Things devices allow insurers to automatically collect more complete data from customers and use it more widely.
How can AI help in insurance?
According to the researchers, by implementing artificial intelligence, insurers can save time, reduce costs and improve interaction with customers. AI can also transform complex processes, such as underwriting, payments, and help detect fraud. With artificial intelligence, insurers can also reduce the proportion of human error.
- Risk assessment
Historically, insurance underwriters have relied on information provided by customers to assess risk. However, some applicants may be dishonest or make mistakes unknowingly, so the risk assessment is inaccurate. Machine learning, and in particular natural language understanding, allows AI to study data from other sources of information, for example, posts on social networks, and by combining all available information about a customer or business, give a better assessment of potential dangers. So the amount of premiums will be more in line with the real risk to the client’s property or life. In the conditions of price competition, a more individualized risk assessment model is one of the insurer’s key advantages.
- Reduction of errors
People can get tired, bored and make mistakes while working. The more employees involved in the insurance and event settlement processes, the more likely human error occurs. Using algorithms instead of people can reduce time and the number of errors, in particular, when transferring information from one source to another. So AI-based programs can be considered the most conscientious workers.
- Improvement of customer service
In insurance, customer service is of prime importance, which is why chatbots have become very common and popular. Such programs can consult customers with typical questions, and do it efficiently without human intervention. In addition, they are always available 24/7, unlike humans. The trend in the near future may be to use voice-based AI-based online consultants, not just chatbots that answer written questions.
- Speeding up the processing of applications for payments
With the digitization of the insurance claims process and the introduction of AI, the data needed to make decisions can be gathered quickly and automatically from multiple sources without human intervention. The human insurer then reviews the AI findings and finalizes the insurance claim. But sometimes, in typical situations, the decision can be made completely automatically.
So, AI can bring a lot of benefits to insurers and customers. However, will it revolutionize the industry? Hardly, because mathematical models and statistical data processing have always existed in insurance to assess risks and calculate the price of an insurance policy, quantify losses, etc. But artificial intelligence will be able to combine all the disparate data analysis systems to make insurance better. The coronavirus pandemic also prepared humanity for the widespread use of AI: clients are used to online services where there is no live contact with a person.
Still, are there any downsides to using AI?
At first glance, everything looks quite positive, but as with any innovation, there are certain risks in the implementation of artificial intelligence. Understanding this, a group of experts signed a warning letter “against AI”. In it, they ask businesses for a moratorium on the development and implementation of powerful AI systems for at least six months to give humanity time to prepare for revolutionary changes.
Indeed, due to extremely complex and often opaque AI algorithms, it is not always easy to understand whether a particular conclusion is justified. This could create a global distrust of companies that make decisions based on the findings of artificial intelligence. Last but not least is the danger of misuse of customer data. As for risk assessment, there can be problems here as well. For example, if the machine learning was based on outdated or irrelevant data, then the conclusions will be wrong.
Among other concerns is the assumption that the development of machine learning and AI technologies will displace human employees from the insurance industry. But here a lot will depend on the choice of the client. Is he ready to entrust his insurance to a “job” that he does not get tired of, or does he prefer communicating with people and trusting them in making decisions? Answers to these questions were not long in coming.