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AI in Insurance: Addressing the Industry’s Key Challenges

AI in Insurance: Addressing the Industry’s Key Challenges

Artificial Intelligence In Insurance Is Improving The Insurance Customer Experience By Leaps And Bounds

The insurance industry has been well known to be the least innovative when it comes to customer experience resulting in customers being disappointed and dissatisfied after their interactions. Nonetheless, things are definitely changing, and artificial intelligence in insurance is playing a key role in disrupting the entire industry and improving the insurance customer experience by leaps and bounds.

According to PwC’s 20th CEO survey conducted in 39 countries, the greatest concerns that loom over the 95 CEOs of the insurance sector today are the subdued premium rate, mild interest rates, shifting consumer behaviour, slow economic growth, need for regulations and technological innovations and blazing market competition.

What boosts optimism, though, for these insurance companies amid much disruptive chaos is the fact that digital revolution is everywhere, increasingly transforming conventional business models and adopting digital solutions such as:

  1. Bot-based advice system
  2. Pay-as-you-go commerce
  3. GPS-sensing software
  4. Automated business processes

Let’s further delve into the idea of introducing artificial intelligence in the insurance industry and how it impacts the current legacy processes.

Existing scenario for Insurance companies

According to the survey from global insurance leader EY that was conducted on more than 100 companies –

  • 79% regretfully reveal that they are yet to think of going digital or are in their learning phase
  • 57% said they own business operating models with no support for digital platform/solutions
  • 89% don’t emphasize on previous interactions while serving customers with product/service recommendations

This shows how the insurance industry is struggling to comprehend and leverage digital advancements. The survey also illuminated some of the key challenges as faced by these insurance leaders. Some of them are:

  • Digital capabilities not meeting digital goals

On a stage of global digital leadership, companies aspiring to experience potential improvements in their digital objectives have failed to achieve desired results. Some of them admit to reaching somewhere near the target. However, those boasting digital transformations, are only 10%.

  • Resistance from ambiguous insurers

Some of the negative elements that stymie the integration of all things digital are legacy processes, plain tech power, non-innovative approach, sluggish delivery and other internal constraints. Companies are still to overcome their ambiguity and hesitation towards digital intelligence to discover future business opportunity and unique potential for consistent growth.

  • Conflicts among distributors

Another factor that hinders digital implementation in the insurance sector is resistance from agent channels and distributors. This is why it is essential to eliminate inhibitions and clarify misgiving developed against investment in digital movement. Having an honest value proposition to improve customer experience can help alleviate the tension.

  • Poor mindset showed towards digital analytics

Customer segmentation, behaviour analysis, and predictive modelling are modern drivers of marketing potential set in motion by smart data-driven technologies. Without installing capable analytics, it is impractical to draw maximum value from the implementation of the digital strategy.

  • Social media and mobile – still marginalized

At times when digital devices are indispensable, it is unreasonable to ignore the power of bringing insurance operations on mobile and staying connected to maximum prospects through the myriad of social media platforms. Since socials help make your marketing efforts more effective and engage with the digital-savvy audience, it should be an integral part of insurance digitization.

Soaring Pressure Of Cost, Competition And Consumer Expectations

Although insurance CEOs are conscious of the herald of digital disruption breaking through the industry, it will be a whole new challenge to keep up with these revolutionary changes and to see it beyond the plain integration of modern technology. Intelligent solutions must be innovative enough to foster better customer relationship and deliver customer experience in a way that inspires much-needed poise between incipient market expectations and cost optimization.

Apart from these, another pressure point is coming from emerging InsurTech entrants who are giving rise to tough competition by creating affordable solutions to reach and serve customers. What is relaxing is that to surpass this challenge, industry leaders are prepared to embrace new innovative possibilities and appreciate the role of creativity in evolving the processes and becoming a beloved brand in the financial marketplace.

Artificial Intelligence in the Insurance industry

The idea of digital technologies ruling financial market is nothing new since Nasdaq in its early days established a secure connected network of trading desks for integrated customer data records. Many global financial companies and banks in those days relied on punch card and basic computing system to monitor customer activities. Hence, the concept of Artificial Intelligence in the Insurance industry analyzing data, anticipating results and helping with decision making is not some futuristic fiction.

AI could help banks and insurance agencies deliver service with efficiency and quality as it has done for major leaders in other industries such as Hospitality, healthcare, and customer care processes. The adoption of AI can facilitate:

  • Sudden disaster-caused damage analysis
  • Risk tolerance calculation and assessment for trading desks
  • Transaction analysis for banks and financial organizations
  • Selection of better investments based on preferences, risks and spending patterns
  • Consistent optimization of customer investments and insurance coverage

Due to its evolved predictive capability, AI works seamlessly with ATMs, mobile payments, and online claims processing. It helps digitally connected individuals take faster and smarter decisions by improving transparency in data interpretations.

For instance, families that harbor major concerns of financial security in retirement phase can opt for investment decisions like 401(k) plans which ensure immense security. AI’s powerful analytical brainwork can guide customers while making wise investment decisions that incorporate their maximum risk potential, premiums preferences and maintenance of funding sources for 401(k) by suggesting improvements in their weekly or monthly expenditure. AI solutions can also aid in customers’ non-retirement investment decisions and insurance coverage.

AI-powered opportunities for the Insurance market

Despite the fact that it is difficult to anticipate the full utilization of Artificial Intelligence in the Insurance industry and replace specific actions with automated intelligent machines, market leaders are optimistic and confident when it comes to reaping the benefits it entails. A promising study by Accenture and Frontier Economics has claimed that AI will increase 10-40% labor productivity in 11 western industrialized countries and Japan by 2035. If this optimistic projection is true, the economic growth is likely to double by 2035.

Considering the current scenario, AI-based products will include insurance coverage for smart driverless cars, smart sensors and factories and cybercrime damages. Furthermore, AI will also empower important processes like claims analysis, asset management, risk calculation, and prevention. For instance, property damage analysis can be conducted through image processing part of Artificial Intelligence in Insurance. The same machine can be used to make an informed decision about investments based on intelligent algorithms.

As financial sectors are brimming with the unprecedented bounty of financial, insurance and investment data, the need for integrating Artificial Intelligence in the Insurance industry can drive whole new growth for this industry. Powerful data management tools of Artificial Intelligence can help people size up and navigate through pyramids of data while also helping businesses create intuitive and interactive customer experiences. With AI incessantly advancing, its role will become sumptuous in revolutionizing insurance industry and bringing it to next level.

In a nutshell, here are a few good target areas where Artificial Intelligence can achieve significant impact and emerge transformative for the insurance industry as a whole –

A. Cost and customer intimacy

Adopting these technological, process-oriented changes isn’t just as simple and plain as introducing new technologies, but it is also about how innovatively to approach the idea of enhancing customer intimacy to fulfil rapidly changing market expectations and adjust cost-related constraints.

B. Market competition and pressure

Due to heightened pressure and surrounding market competition from lean and agile InsurTech entrants, established businesses have to be prepared to battle it out and improve their methods of getting closer to customers while effectively slicing on cost and price stringency.

C. Innovations, challenges, and future possibilities

With a marketplace that is digitally disrupted, it is hard to merely capitalize on fundamental innovation and common margins of cost optimization when it comes to achieving better growth and revenue. However, insurers are taking the challenge positively since 67% of industry leaders (according to a PwC report) are happy to embrace fresh AI-driven possibilities and find creativity and innovation critical to their organizational growth.

D. Humans and machines well-synchronized

Insurance CEOs (nearly 61%) are also coming shoulder-to-shoulder when it comes to gaining competitive advantages from the synchronized functioning of humans and machines applying their combined efforts in a common workforce. This new-age advancements and AI capabilities promise to rejuvenate the orthodox elements of the Insurance industry as we see it now and foster a well-organized, intelligent and confident ‘growth-accelerating platform’ that reaches far from the frontiers of cost, competition, and customer satisfaction.

The insurance industry has entangled in outdated practices for quite some time now. However, the amalgamation of a new wave of thought process and AI technology has the potential to completely change the customer experience to provide great service in a way that resonates with modern customers.

Since the discussion above creates a lot of curiosity and interest around how AI can satisfy the promise of advancing the insurance sector, the next blog will lead us to the discovery of various opportunities and solutions that AI is disrupting the market with

Note: The views and opinions expressed are solely those of the author and does not necessarily reflect the views held by Inc42, its creators or employees. Inc42 is not responsible for the accuracy of any of the information supplied by guest bloggers.

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Mitul Makadia is Founder of Maruti Techlabs and a true technophile. With his industry experience, he has rapidly developed Maruti Techlabs in specialized services like Chatbot Development, Artificial Intelligence, Natural Language Processing and Machine Learning. Makadia has considerable expertise in Chatbot Development and NLP.

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