AI Trends in Insurance for 2020 and Beyond

It would be fair to say that the insurance industry hasn’t traditionally been at the leading edge when it comes to innovation and technology. With a lot of regulation, businesses tend to be quite risk-averse and slow when it comes to the adoption of anything new. However, over the last two or three years, we’ve seen a substantial interest in the term “Insurtech” according to Google Trends. This is the use of technology innovations designed to gain savings and efficiency on the current insurance industry framework. Even though firms might be slow to adopt techniques, they are clearly looking into it. 

Interest over time in the term “Insurtech” in the US – source: Google Trends

In terms of search volume, the trend above is around a 30% growth year on year from 2018 to 2019.

As we move towards the end of 2019, artificial intelligence (AI) is starting to infiltrate parts of the insurance industry where firms are becoming more accepting of Insurtech products. Let’s take a look at the AI trends for 2020 and beyond.

What is AI?

Before we start talking about the trends, it is important to define exactly what we mean by AI to cut through all the buzz and hype surrounding the term. In the field of computer science, AI is the intelligence demonstrated by machines. The technology enables a computer to think or act like a human by taking information from its surroundings and deciding on a response.

While the movies and television often synonymize AI with robots (think Terminator-style scenarios), we are some way off that in truth. The main applications come in much narrower forms like talking to our smartphones, searching on Google, or being recommended a product by Amazon. All of these are examples of machines that learn.

In the insurance world, machines that can learn independently have several areas where they could be game changing and are already having a sizable impact.

Autonomous Vehicles

For many years now, we’ve been told that autonomous or driverless vehicles are on the horizon. However, the plans have never quite come into fruition for reasons like data privacy, sharing, and latency. Towards the end of 2019 and going into the new decade, with more tests going on every day, we are slowly starting to see these vehicles moving into society. This could fundamentally change the face of auto insurance.

For example, in the case of an accident, right now it is the fault of a human driver and the insurance claims can be dealt with accordingly. However, as more and more self-driving cars hit the street and humans are less involved, where does the fault lie and how is that managed with insurance?

Companies like Google, Volvo, and Mercedes have already said they will accept liability for any accidents involving their cars. Tesla has stated that they intend to extend an insurance plan to all owners of their products. Standardizing insurance offerings for autonomous cars will take some time to get right as the technology evolves.

Ridesharing has also created some challenges for the insurance industry. Companies like Uber and Lyft have created a need for “ridesharing insurance” rather than typical auto coverage. Insurance agents need to make sure they research rideshare policies and bridge the gap between that and their typical auto policies.

Blockchain Technology

When it first came onto the scene, Blockchain got a lot of press with its links to Bitcoin, Ethereum, and Ripple in the world of crypto-currencies. Over the last few years, insurance firms have slowly started integrating Blockchain technology into their processes with the promise of avoiding losses, negating fraud, and improving efficiencies.

Blockchain is a centralized immutable ledger. This means it is essentially a giant audit trail of all transactions that happen and can be viewed by anyone who is a part of that Blockchain. In this way, it is perfect for negating false claims and scams as each interaction is validated by the workflow of the ledger. In the insurance world, there is immense value to be had in ensuring loss ratios are reduced while for customers, they get claims resolved a lot faster.

The Blockchain can start as soon as a policy is underwritten. Think of insurance just like a contract which is exactly what it is. People pay a premium to be covered by an insurance carrier for the terms laid out by them. In home insurance, this might be for if somebody has a break-in and certain terms are covered. When somebody notifies the insurance carrier of a claim, it goes into the Blockchain. If the terms of the contract are met, all parties are alerted, and a decision could be made on the claim instantly.

The central repository of Blockchain gives a single point of truth where insurance carriers can automate large parts of their manual processes. At the same time, customers are kept happy by an accurate and fast settlement.

Personalizing Premiums

The art of personalization of products is a big one for the insurance industry. Customization of products has become something of an expectation for consumers with big companies like Amazon, Google, Facebook, and Netflix offering it as standard. Customers want to be treated as individuals and not the same as everyone else.

To supply personalized premiums, insurance companies need a deep insight into data, developing the right behavioral contexts to make a decision. A study by Accenture showed that 77% of insurance customers are willing to provide additional data to insurance companies if they can benefit from a cheaper premium.

For example, smart home technology has become commonplace across the globe. People can monitor their electricity usage, water flows, door locks, and much more. If somebody has all this equipment in place and actively shares the data for insurance purposes, there is a case to provide a personalized premium. If somebody has smart cameras in their home, there is far less chance of theft perhaps. Customers benefit from lower premiums and insurance companies can gain from fewer claims.

Wearable devices are starting to be used to personalize health insurance and travel insurance claims. If a customer is covering 10,000 steps on average per day, companies may see them as less risk and give the benefits of a cheaper premium.

Enhanced Customer Experiences

There are two key areas where AI is already and will continue to improve customer experience across all sectors of insurance.

Claims Settlement

For an insurer, the typical claims process is a very manual one. It will involve lots of paperwork, phone calls, visits, and audits. With AI, it no longer must be like this.

Insurers are finding ways that allows customers to manage their own claims process via self-service. For example, in travel insurance, the cancellation of a flight accounts for a high volume of claims. Given the time a flight departs is factual information, there is no reason why it shouldn’t be quick to resolve. A self-service AI platform can have a customer log their flight number, automatically check if there was a delay or cancellation and instantly pay out on the claim.

Only if a request fails an autonomous review does a human get involved saving a lot of resource time whilst providing an amazing customer experience. Insurance companies are using claims settlement as their use case for Blockchain.

Customer Service Bots (Chatbots)

The term “Chatbot” has become quite commonplace in the world of customer service in recent times. A Chatbot is a computer program that can communicate with humans using AI and Big Data. In fact, some are so good that it is hard to differentiate between human and machine.

Insurance is typically quite complicated for customers to understand. This can lead to the need for them to speak with somebody or taking out the wrong type of cover. To solve the problem, insurance firms are looking towards trained conversational AI bots, capable of handling customer queries. For example, Allianz have a bot that offers 24/7 online assistance named Allie and Mia answers questions or the Co-op Banking Group.

Customers prefer digital communication methods and it’s the right time for insurance to be part of that trend. Some have even tinkered with automating a purchase process using Chatbot agents.  

The all-encompassing insurance

An emerging trend in the insurance industry is for the “All-in-One” form of insurance. The concept is like that of Open Banking which has started to be more commercialized during 2019. Traditionally, customers will have different providers for each insurance. This means they need to manage residential, travel, auto, health, life, pet, and legal insurance to name just a few completely separately.

With the vast amounts of data available, companies in the insurance industry can gather all details about their customers into a single view. If they have a single view of everything they know about the customer, it is plausible to offer a single insurance product. AI and Big Data platforms can make all this possible.

Summary

The topics discussed here are by no means exhaustive and there are many other ways in which AI and Big Data are being used in the insurance industry to drive a better customer experience. The key takeaway here is that it is becoming increasingly important for those in the industry to have at least a base level understanding of AI and its applications. If insurance agencies want to keep up with the competition, investment in AI is no longer optional but simply something that must form part of ongoing business strategy.  

Dshanya Reese, CIC is the Brand Marketing Manager for an independent insurance agency in Austin TX.