The rise of AI in insurance: What it delivers for policy-holders
Artificial intelligence (AI) is changing the way insurance works. It’s part of the digitisation drive to
reduce the sector’s dependence on manual processes.
According to the professional services consultancy, McKinsey, AI uses computing to potentially
mimic the perceptions, reasoning, learning and problem-solving of the human mind.
Already about two-thirds of insurers globally have reduced staff thanks to AI. That’s due to AI
supporting or replacing human roles. (However, Australian insurers are typically slower
adopters of technology due to a variety of factors including the regulatory environment.)
Insurance companies use AI for customer service (chatbots), fraud detection, claims processing
and more. Insurers are a perfect match for harnessing AI due to the large amount of data they
hold.
AI and big data come under the umbrella term of Insurtech. Other forms being harnessed
include software as a service, such as blockchain and the Internet of Things. They coalesce to
ensure insurers’ data doesn’t stay in silos, but ‘flows’.
So, what does the disruptive technology of AI mean for you and your business as a policy
holder?
More accurate risk assessment
In the past, insurers have relied on the information you’ve given them and sometimes it’s not
the complete picture. Now, insurers draw on better quality and larger data sets to conduct their
risk assessments.
You may not be aware of the type of data insurers collect that could be used to assess your risk
and, therefore, price your premium, including:
- Social media postings
- Customer loyalty programs
- Online shopping
- Fitness tracker data
- Yelp and other review sites
- Regulators’ public notices about fines, penalties, bankruptcies, etc.
Research from the University of Sydney says anti-discrimination laws are the only constraint on
insurers using the above data for their pricing. The current review of the Privacy Act might
change that, though.
The benefit of insurers having such wide and deep information means they can offer precise
premiums based on your individual circumstances and risk profile.
Fraud detection
Artificial intelligence scouring richer data allows insurers to detect fraud patterns that aren’t
obvious to humans. AI can monitor and analyse customer behaviour, check documents and
lookout for suspicious activity.
A form of AI – machine learning – sees algorithms teach themselves over time to spot any
changes in the underlining data. It actually builds up a bank of suspicious scenarios. This builds
up their power in making predictive recommendations to help detect fraud in real time.
Reduced human error
Rather than humans rekeying the same data into an insurance portal, AI works by scanning the
information directly from PDFs. Such streamlining sees fewer humans processing your
information, thus reducing the risks of them making errors.
Faster claims processing
AI’s machine learning tools can quickly work out the crux of a claim and its possible cost. This
saves some time for the insurer, but a human will still need to check AI’s verdict and settle the
claim.
Meanwhile, insurers are still working with AI to improve how they design their products, i.e.
policies.
A survey of insurers by the Australian Prudential Regulation Authority echoes the above
benefits for InsurTech. Those surveyed said the technology would:
- Improve their understanding and management of risk
- Allow them to make better decisions across their business
- Improve customer experiences
- Offer more tailored services
Consider us your AI guide
Insurers who use AI see it as a ‘win-win’ for them and their customers. We’re adept at using and
keeping watch on advanced technologies, such as AI, to improve our service to you.
P.S. If this article has prompted you to think about how your business could use (or might
already use) AI, check out these best practice guidelines from the federal Department of
Industry, Science and Resources.
