AI is impossible to ignore. While companies are considering the pros and cons of incorporating AI into their business processes, they are already being left behind by their more nimble and forward-thinking competitors.
While some industries have already been thoroughly transformed by AI, the insurance industry has been somewhat slow to fully embrace the technology’s potential. On one hand, this may seem foreboding for insurance companies, as they can be certain that their competitors are exploring AI’s potential behind the scenes. On the other, this is certainly good news, because the horizon of opportunity is still broad with plenty of space to make an impact with a comprehensive set of customer-centric, process-improving, and cost-effective AI-powered solutions.
The potential of AI utilization in insurance is vast. From customer support and personalized offers, across automation and simplification of complex processes, all the way to back-office operations, AI can provide comprehensive improvements for customers and insurers alike.
Three key areas of AI impact in insurance
In a recent LinkedIn live session, Gary Duggan, former CEO of Tesco Insurance and Saga Services, now in the capacity of a board advisor at HTEC, spoke at length about the widening horizon of AI utilization in the insurance industry. While he was buoyant about AI’s potential to thoroughly transform insurance, he highlighted three particular areas where AI can bring immediate and substantial benefits:
- Claims management
- Customer experience and customer duty
- Pricing and underwriting
Let’s take a closer look at each of these areas.
Claims management
Data is the foundation of all decision-making within insurance. The volume of data in insurance, both from internal and external sources, has grown exponentially in recent years, helping insurers make as accurate decisions as possible. The amount of data sets and platforms that insurers need to bring together to draw valuable insights is staggering, and that’s where AI comes in.
Currently, the insurance industry is marked by claims operations burdened with data forms and manual processes, with increasingly complex and sophisticated claims requiring extensive analysis from claims handlers and adjusters. AI can help automate the collection and collation of data and provide processed information to claims handlers. This would not only save time and effort and shorten the processing of claims, but also enable claims handlers to spend more time on the value and judgmental parts of the process. Using AI to handle areas such as claims documentation, automation, and triaging can help improve the customer experience by enabling handlers to reach their decisions more quickly. It creates a win-win situation for all actors, with customers reaching resolution faster, companies reducing operational costs, and workers themselves benefiting from reduced manual and repetitive work. Furthermore, AI can help identify patterns of fraudulent behavior in an increasingly technologically sophisticated landscape.
Customer experience and customer duty
The joining forces of evolving customer expectations and more stringent customer rights protection regulations (such as Customer Duty in the UK) are requiring insurers to place customer satisfaction at the center of their operations. AI has the potential to help insurers reach both their customer satisfaction and compliance goals by enabling insurers to create better outcomes for customers.
On the customer experience side, AI can play a multifold role by helping insurers gain a better understanding of their customers through data analytics, identifying customer trends, tailoring personalized offerings, and providing improved customer service via chatbots and voice assistants.
Pricing and underwriting
Similar to claims, present-day underwriting practices rely on gathering enormous amounts of information from disparate sources. This requires an inordinate amount of work from underwriters, particularly for more sophisticated and complex policies and underwriting cases. Gathering a mass of information is still a key part of an underwriter’s job, but AI could change that soon.
The ability to automate document gathering and processing would free underwriters to focus on the judgmental aspects of decision-making. AI-powered automation would also be beneficial to consumers due to the speed of decision, as well as organizations in terms of making the best decision from a pricing perspective and potentially identifying an accumulation of risk and finding the best ways to mitigate it.
Challenges of adopting AI in insurance
While there is a long-established and widespread belief that the insurance industry is rather traditional and thus slow or reluctant to embrace innovation, the major reasons for the slow adoption of AI are far less abstract. Adopting any sort of major change on an enterprise level is always tricky and comes with its own set of challenges and obstacles.
The main challenge of AI adoption is effectively scaling the internal use of AI. While many (if not all) organizations will try to introduce pilot programs in smaller segments of the company to test the waters and assess the value and the feasibility of using AI tools, moving to enterprise-wide transformation is a challenge due to several common obstacles:
- Complexity
Insurers work with multiple data sets processed through different legacy platforms, and incorporating AI tools into the ecosystem is a challenge. This challenge is compounded by the recent market consolidation and the merging of insurance companies, with organizations inheriting and incorporating a variety of legacy systems. The current situation is somewhat similar to a wave of modernization from a decade ago, when organizations were trying to connect the modern digital front-end with the legacy backend systems. Some insurers are beginning to embrace more modular platforms, which can help accelerate AI adoption.
- Evolving regulation
The playbook for using AI ethically is still being written, and the situation is particularly delicate in the insurance industry, which deals with large volumes of personal information. Without a precisely defined legal framework, organizations are reluctant to fully incorporate AI into their processes.
- People and culture
Significant internal change is always met with some amount of resistance. Large-scale adoption of AI requires organizations to bridge the existing skill gap and enable the workforce to efficiently use AI tools while instilling a shift in organizational culture that will highlight the benefits of transformation and turn skeptics into believers.
How to prepare a team to work alongside AI tools
Reflecting on HTEC’s experiences in helping clients modernize their operations and incorporate AI tools into their processes, Gary Duggan highlights a sensible and effective path forward:
“Similar to how organizations were adopting Agile methodologies, we start with rapid prototyping with a select piece of business and a group of forward-thinking employees looking to enrich their careers and do a better job for their customers, who would welcome and test new tools. Then we iterate – build, test, and learn, and then gradually roll it out to other lines of business. HTEC took this approach with an insurance client, and it seems to be working very well in bringing hearts and minds together. Over time, we start to build some real advocates who can champion the change and the improvements it has brought about, and then other people in the organization begin to notice it and want to take part.”
The benefits of AI adoption in the insurance industry are becoming increasingly difficult to ignore. The technology not only creates opportunities for competitive advantage and promises faster and more efficient processes for organizations, but it also enables better customer experiences, more personalized and relevant pricing for consumers, and more meaningful and fulfilling work for insurers.
With technological innovation accelerating at an unprecedented pace, adopting AI quickly and impactfully will be a key factor of insurers’ success in the modern market.
HTEC has the technology and expertise to provide organizations with the right tools, skills, and setup to make the most of AI. Get in touch to explore how we can help you harness AI safely and efficiently.
