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AI in Insurance: Uncovering AI's Potential in the Insurance Industry

By Devin Partida
Published: December 20, 2022
Made Possible By AltaML
Key Takeaways

Insurance AI is a fairly new field, but it's a growing one. And this trend is poised to redefine the insurance industry over time, benefiting both customers and the insurers that serve them and making the industry safer, more accessible and more helpful.

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Artificial intelligence (AI) is disrupting virtually every industry. Fields like advertising, IT and financial services have become inseparable from the technology, despite its relative newness -- and this is just the beginning.

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AI promises to revolutionize the future of the insurance sector. (Also read: How AI and IoT are Affecting the Insurance Industry.)

The Impact of AI in Insurance

Insurance is full of data-heavy, analysis-centered tasks. This kind of work is what AI excels in -- making the industry ripe for disruption. Insurance firms could automate many of their everyday operations by employing AI.

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Automation has benefits beyond reducing staffing needs and related costs. Repetitive, data-heavy tasks are often challenging for humans to perform, especially with consistent accuracy. AI could handle them with higher accuracy, more consistency and in less time, all while freeing employees to focus on other workflows, boosting overall productivity. (Also read: The Top 6 Ways AI Is Improving Business Productivity.)

Machine learning algorithms can quickly and accurately find patterns in large datasets humans would’ve missed. In an industry where attention to detail is as crucial -- as it is in insurance -- that can yield substantial improvements. Some estimates suggest AI could add as much as $1.1 trillion in annual value to the sector.

Where AI Will Make the Biggest Impact in Insurance

While insurance AI could change processes across the industry, some areas will see more dramatic changes than others.

Here are the workflows where AI will make the biggest impact:

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AI Claims Processing

One of the most significant use cases for AI in insurance is automated claims processing. Managing a claim is typically a time-consuming, error-prone process. Claims writers must review damage in person or analyze pictures, assess the situation surrounding the incident, compare it to the fine print of the coverage and determine the appropriate course of action.

That can take days -- but AI could do it in hours, even minutes.

Machine vision algorithms could analyze photos and videos of an accident, while natural language processing (NLP) models review contracts. Technologies like this could perform more accurate data analysis far faster, processing a claim in minimal time. That would reduce the workload burden on insurance firms and minimize customer wait times.

Fraud Detection

Similarly, AI’s pattern recognition abilities make it an excellent tool for detecting and preventing fraud. Financial companies already use fraud prevention AI tools and the insurance industry could follow suit. While a human may be able to recognize when a claim seems suspicious, AI can do so faster and more accurately.

Machine learning models can analyze vast amounts of data simultaneously. That lets them compare customer history, similar incidents, false information and more to detect abnormalities in a matter of minutes, if not seconds. They could then either flag a case and alert human workers to investigate it further or deny the claim automatically. This speedy, accurate fraud prevention could save families up to $700 a year by reducing fraud-related high premiums. (Also read: AI in the Insurance Industry: 26 Real-World Use Cases.)

Risk Analysis

AI in the insurance industry will also have a significant impact on risk analysis. Insurance firms already gather information like geospatial data to reveal high-risk routes and areas or driving patterns to determine individual customers’ risk levels. AI could take this data analysis further, offering more personalized plans to benefit consumers and firms.

AI models could also analyze factors like historical weather patterns and users’ past claim-filing behavior to create custom home insurance plans. Similarly, they could determine a driver’s risk of an accident by looking at their behavior through telematics devices and the likelihood of crashes in their area.

Because AI is typically faster and more accurate than humans in these analytical tasks, they could create custom insurance plans that are fairer to customers and less risky for the firm.

Current AI Insurance Use Cases

While the use of AI in the insurance industry is relatively new, several firms already employ it. As use cases like this become common, it’ll likely inspire more firms to embrace the technology, ultimately changing the face of the industry.

Here are some examples of insurance firms currently employing AI:

Liberty Mutual

Liberty Mutual uses machine learning to assess vehicle damage when clients file claims on their phones. This streamlines the process and can tell customers whether they need to replace or simply repair their vehicle almost immediately. The firm also uses AI in fraud detection and plan customization, claiming they’ve seen “significant economic payback” from these technologies, in which they invest $2 billion a year.

Allstate

Allstate has capitalized on a different side of AI. The industry giant uses an AI-powered chatbot called ABIE to offer real-time insights and advice to small business owners, using machine learning to learn more about the corporate world and adapt to specific customers.

Originally just an internal tool for Allstate agency owners, ABIE is now also available to business owners outside the company.

Insurify

AI insurance is changing the industry for smaller businesses, too. Tech startup Insurify has seen consistent 250% year-over-year revenue growth thanks to its AI tool.

The machine learning platform analyzes deals from over 100 insurers to help consumers find the best plan for their needs. (Also read: How Explainable AI Changes the Game in Commercial Insurance.)

The Future of AI Insurance

As AI technology improves and firms embrace digital transformation, AI insurance will grow even further. Entire fields in the industry could change as AI becomes a standard part of running an insurance firm.

NLP and machine learning tools will likely automate more and more of the underwriting process. While they require human workers to review final decisions today, they could become fully autonomous in the future. Employees could only manage underwriting for the most sensitive cases and even then, AI could perform much of the initial work.

The rise of IoT devices, which provide more data points for AI to analyze, could expand plan personalization, too. Home insurance and similar coverage types could adapt over time with varying conditions, just as vehicle insurance does today with telematics data.

AI chatbots could improve as well. These tools are already fairly standard to offer around-the-clock support, but as technology advances, they could personalize answers to each customer. Virtual customer service agents could learn how clients like to communicate, then act and adapt to their ongoing needs to provide the most help in every situation.

AI Could Define the Future of Insurance

Insurance AI is a fairly new field, but it's a growing one.

As more firms realize the technology’s potential, more will implement it. This trend could redefine the insurance industry over time. That shift will benefit both customers and the insurers that serve them, making the industry safer, more accessible and more helpful. (Also read: What Hyperautomation Can Achieve.)

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Written by Devin Partida | Editor-in-Chief for ReHack.com

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Devin Partida is the Editor-in-Chief for ReHack.com, and has had her freelance work featured in the official CES magazine, as well as various other tech publications. When she isn't writing about the latest tech, gadgets or cybersecurity trends, you can find her biking around the Golden Gate Bridge. To view Devin's full professional portfolio, please visit this page.

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