Multiple industries are using artificial intelligence (AI) and related technologies to streamline their processes. While it is easy to imagine this in the manufacturing industry, traditional service-based sectors are also following suit, many of them with exceptional results.
One of these is the insurance industry, which even has the term “Insuretech” for the software transforming its operations. Below, we discuss how AI is helping insurance companies flourish.
In uncertain times, the right insurance can provide much-needed peace of mind. This has been proven in the massive growth insurance companies have undergone in the past few years. Revenue for health and medical insurance alone has grown by 3% year on year since 2017. This does not even include insurance for property, cars, and life insurance.
Yet not all this growth is down to people’s uncertainty, or even an increasing population contributing to revenue. In many instances, this can be put down to how the sector has streamlined and improved operations with the help of AI. Individual companies using these improvements are really reaping the benefit. Forward-thinking providers such as Honeycomb Insurance have even managed to expand into new states. This company moved into Georgia, its 9th state of operations, and even managed to raise $15 million at the beginning of the year alone.
In the past, underwriters relied on witness accounts, usually from the applicant, to assess risks. The problem with this is that people often remember incorrectly, or they may deliberately give untrue accounts. This results in bloated paper trails that eat up resources and labor.
The internet of things exists in connected devices, from fitness trackers to recording devices in our cars. Proving a great help, all this information can be processed by artificial intelligence algorithms. Able to scan them quicker than agents, they allow insurance businesses to reach settlements much more rapidly.
A more accurate assessment means fairer premiums. This can increase competitiveness, in an industry where the price is everything. Utilizing the scope for individualization means personalized policies for businesses and consumers. For example, companies such as Honeycomb Insurance have been pioneering this for some time. Specializing in real estate insurance, they are creating people-focused, tech-driven insurance policies. This makes the process simpler and can lead to more accurate pricing.
Technology is also speeding up operational efficiency to further cut back on the insurance paper trail. Optical character recognition (OCR) is a system that recognizes handwritten characters, then converts them into digital documents. Administration assistants no longer need to type up written text to add it to digital systems. It can also go further, extracting data from photographic identification.
The insurance industry has long been a haven for fraud, with unscrupulous people believing they can dupe companies into paying out for deliberate actions. Some are obvious, others are harder to prove, and huge profits get lost to insurance fraud every year. While this has improved, fraud detection using technology could help make it a thing of the past.
AI does this by spotting familiar patterns in fraudulent activity. Some algorithms now have accuracy rates as high as 75%. They can flag up irregularities in claims, along with conducting cost assessments. Of course, the AI here can only be deemed successful if it manages to update these processes itself. Criminals will always find ways to change their behavior to cheat the system, so the systems will need to adapt accordingly. But with $40 billion lost to insurance fraud annually, there is much to be gained.
Future of Insuretech
By no means is AI a cure-all. Insurance and its claims are so unique it is easy to see that they will always need a human eye cast over them. Yet these systems can make processes easier. They can reduce money lost by insurance companies, either through fraud or by paying out claims that are higher than they need to be. However, it will also have a knock-on benefit for the consumer, who will get more competitive individual quotes.