How Artificial Intelligence Is Reshaping the Insurance Industry
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In 1997, IBM's Deep Blue earned itself the title of becoming the first computer in the world to beat a chess champion when it defeated Russian grandmaster Garry Kasparov. More than a decade later, in 2011, the computer giant's question-answering system Watson won the quiz show "Jeopardy!" by beating reigning champions. Intelligent machines had arrived and finally given rest to the chatter around artificial intelligence (AI) that started in Dartmouth College, USA in 1956. There was no more disputing the transformative value of AI and the role it could play in helping businesses create customised products and engage with their clients more effectively. AI systems basically help perform tasks such that if the same task was to be carried out by humans, it would take decidedly longer.
These systems can be designed to incorporate common human intellectual behaviour such as planning, understanding, learning, reasoning and problem-solving. This is why AI has been instrumental in reshaping several industries, including insurance. Today, AI in the insurance sector has transcended several use cases from intelligent automation in the back office to providing virtual assistance on the frontlines.
Let's see how exactly is AI reshaping the insurance sector.
Risk Assessment and Underwriting
The main thing that AI is reshaping in the insurance industry is the risk assessment and underwriting process. As the world's digital footprint is getting bigger, the outburst of data is facilitating a new age of personalisation. Insurance companies can use AI to leverage this data to better understand the customers and identify their idiosyncratic risks. This capability of understanding' individual risk' rather than relying on 'group risk' is invaluable for the insurance sector. More accurate risk assessment will also help in fair premium pricing where individuals with lower risks will have to pay premiums lower than those paid by individuals with higher risk. For example, IoT can track an individual's exercise habits and general health profile. This data can then be used to assess the risk of disease in a particular individual and accordingly price the insurance policy.
Today, it has become imperative that the insurance company becomes an integral part of the user's life so that it can offer the user customised journeys. In order to create this personalised value proposition, businesses need to connect with their customers on an emotional level. AI can help insurance companies get up close and personal by gathering useful information (after attaining consumer consent) and understanding the needs of the customers deeply. Once the information has been gathered, the insurance company can reach out at key moments and become a partner to the customers. For example, on the birth of a child, the insurance company can remind the individual about the importance of buying a family cover or a life insurance policy to protect the future of the child.
AI is awake 24 hours a day, 7 days a week and 365 days of the year. Chatbots and virtual assistants are now allowing insurance companies to be constantly available to their customers. Now, because of AI, customers can interact with the insurance company as soon as the need arises. From on-boarding new customers and addressing customer queries to detecting fraudulent claims, chatbots can be trained to do everything.
These are just a few of the main benefits of AI. The insurance industry is only just beginning to scratch the surface when it comes to harnessing AI to improve its value proposition. The optimal use of AI and other technology can help agile insurance companies reshape and reposition themselves for a tech-driven future.