Several industries are using artificial intelligence (AI) and related technologies to streamline their processes. While this is easy to imagine in manufacturing, traditional service sectors are also catching up, many with exceptional results.
One of these is the insurance industry, which even uses the term “insuretech” for the software that transforms their operations. Below we discuss how AI is helping insurance companies succeed.
In uncertain times, the right insurance can provide much-needed security. This has been proven by the massive growth of insurance companies in recent years. Health and medical insurance revenue alone has grown by 3% annually since 2017. This does not even include property, car and life insurance.
Yet not all of this growth is due to people’s insecurity or even a growing population contributing to the revenue. In many cases, this can be attributed to how the sector has used AI to streamline and improve its operations. Individual companies that take advantage of these improvements really benefit. Forward-thinking providers like Honeycomb Insurance have even managed to expand into new states. This company moved to Georgia, its 9th state, and even managed to raise $15 million at the start of the year alone.
Historically, underwriters have relied on testimony, usually from the applicant, to assess risk. The problem with this is that people often misremember or intentionally misrepresent things. This leads to bloated paper trails that consume resources and labor.
The Internet of Things exists in connected devices, from fitness trackers to recorders in our cars. All this information can be processed by artificial intelligence algorithms, which proves to be of great help. They can scan them faster than agents, allowing insurance companies to reach settlements much quicker.
A more accurate assessment means fairer premiums. This can increase competitiveness in an industry where price is everything. Exploiting the scope for customization means personalized policies for businesses and consumers. For example, companies like Honeycomb Insurance have been pioneers for some time. They specialize in real estate insurance and create people-centric, technology-centric insurance policies. This simplifies the process and can result in more accurate pricing.
Digitization of documents
The technology also accelerates operational efficiencies to further reduce the insurance paper path. Optical character recognition (OCR) is a system that recognizes handwritten characters and then converts them into digital documents. Administrative assistants no longer need to retype written text to insert it into digital systems. It can also go further and extract data from photographic identification.
detection of a scam
The insurance industry has long been a haven for fraud, as unscrupulous people believe they can trick companies into paying for premeditated acts. Some are obvious, others are harder to prove, and every year huge profits are lost to insurance fraud. While this has improved, fraud detection using technology could help make this a thing of the past.
The AI does this by recognizing familiar patterns in fraudulent activity. Some algorithms now have accuracy rates of up to 75%. They can identify irregularities in claims and perform cost estimates. Of course, the AI can only be considered successful here if it manages to update these processes itself. Criminals will always find ways to change their behavior to cheat the system, so systems must adapt accordingly. But with $40 billion lost annually to insurance fraud, there’s a lot to gain.
Future of Insuretech
AI is by no means a panacea. Insurance companies and their claims are so unique that it’s easy to see that they always need to keep a human eye on them. But these systems can simplify processes. You can reduce insurance companies’ loss of money, either through fraud or by paying claims that are higher than they need to be. However, it will also have subsequent benefits for the consumer who will receive more competitive individual offers.