August 17, 2021
artificial intelligence insurance

Will AI take over insurance and the world?

The use of machine learning in healthcare will inevitably encroach on other industries, including insurance and finance. Machine learning is already being used to adjust prices or policy terms for auto, rental, and home insurance that have been denied because of factors such as driving conditions or credit history that previously could only be assessed by an underwriter.

What is an AI in insurance?

AI in insurance is an application of AI (artificial intelligence), with the purpose of adopting predictive models and strategies based on AI to take underwriting decisions and adjust prices accordingly. AI essentially replaces traditional underwriting technology by automating pricing decisions.

What are AI advantages for insurance?

Machine learning has become a popular field for technology firms to explore due to its ability to learn without being explicitly programmed – unlike conventional software programs that follow instructions precisely. This allows machines to process incredibly large amounts of data very quickly, using algorithms that can spot patterns or trends from raw data that humans would miss.

Issues with AI in Insurance

There are several concerns about AI taking over the insurance business:

Pricing transparency issues: One major challenge AI may pose is that of pricing transparency. AI typically uses past data as a way to "teach" itself how to price insurance policies in the future; this means AI can be open to unpredictable risks like fraud. Some AI systems are partially 'trained' on fraudulent data, and will then make decisions based on these types of records, thus creating even more fraud opportunities down the line.

Some AI solutions have been developed with the intention of avoiding this issue – by reducing the impact human intervention has on "training" AI systems (for example, through Avoiding Reinforcement Learning ). However, it remains an area for improvement.

Is AI data legal to use?

AI's legal status: AI still faces potential legal hurdles in many countries regarding its rights as a citizen or the ways in which AI can be held liable in the case of fraud. AI could be deemed 'conscious' and thus have a right to enjoy life, liberty, and property – but AI is still legal in some countries at this point in time.

Issues with AI Technology itself: AI systems are not perfect; there are concerns about AI technology failing entirely (which might lead to higher insurance premium costs due to lower risk assessment), or AI being manipulated or used to cause harm intentionally. Discussed further below under "AI Failure Concerns" [ARTICLE END]

AI Insurance tasks

The laborious task of insurance evaluation and pricing was once done almost exclusively by humans using centuries’ worth of actuarial data. Now, just like Airbnb did with hotel rooms, much of the grunt work is handled by machines searching through troves of data in near real-time. Some insurers are experimenting with more sophisticated versions that don’t simply rule out high-risk cases but also offer personalized solutions for people looking for coverage.

To be sure, AI won’t replace every aspect of insurance underwriting anytime soon, but the industry is likely to undergo fundamental changes as AI continues to advance rapidly and consumers become more comfortable with AI-informed decision-making.

The Power of AI Has Grown In Recent Years

In recent years, insurers have been in a mad dash to get data points about customers (everywhere from social media accounts to Fitbit activity) and use that information for marketing purposes, risk assessment, or even policy pricing. While this trend has led many people to worry that the traditional “advisory” role of agents will disappear entirely, AI can actually help them by automating some of their day-to-day tasks so they can focus on what really matters—helping clients make the most of their insurance policies. AI is also a good tool for agents to use with younger customers who have grown up interacting with AI assistants and having them help them make decisions on everything from finding a great pair of jeans to finding an apartment.

Consumers might not realize it, but AI touches many aspects of their lives beyond health care—from the way they are matched with loans or credit cards, to where they get served in restaurants based on previous buying behavior. The new era will bring both challenges and opportunities for consumers as AI continues to evolve. AI can replace certain (somewhat labor-intensive) services that insurers have historically provided by hand, such as underwriting and claims processing. In doing so, AI can increase efficiency, improve the customer experience, reduce costs and ultimately make insurance more affordable. AI will also help consumers get better deals on their existing policies by making comparisons between insurers more transparent. AI will make it easier for an individual to find a policy that fits his or her exact needs rather than relying only on price.

Can AI Technologies Help Consumer Pick Better Insurance Policies

However, new AI tools could put consumers in situations where they are left out of key decisions about their own health care treatment or finances unless they have the expertise to understand AI-generated data. This challenge is particularly acute when AI algorithms and models are used to make predictions related to criminal risk, financial risk, or public safety. AI is not yet able to simulate human judgment or model the many factors that account for why people behave the way they do. AI cannot tell a human what to do about the information it processes, nor can AI explain how it arrived at its own decisions. AI will not replace insurers entirely but instead will automate and scale up some of their functions—helping them sift through vast quantities of data while making better use of human expertise.

How Predictive Analytics Simplify Consumers Understanding Insurance Needs

One thing is certain: AI-powered underwriting has the potential to make insurance more transparent for consumers by revealing exactly what they are getting in exchange for their money. Consumers should know that AI can be programmed with factors that may discriminate against certain people, and transparency laws should ensure that consumers have a right to appeal AI-generated decisions or even ask human experts to review them. For instance, if an AI tool underwrites an individual’s home insurance premium based on data like his/her zip code or type of car, the AI tool should be programmed to seek out information about areas or neighborhoods in the same income bracket and apply that data. AI-driven transparency will also help people understand their health insurance policy better, which will allow them to make more informed decisions about whether they want higher deductibles for lower premiums. AI can also be used to help consumers predict when they might need costly medical procedures by leveraging AI technology through wearable devices such as Apple Watch or from a blood-pressure monitor. This could save individuals money if they do not need costly emergency care in the near future. AI tools are likely to take some time before they reach their full potential in the insurance market, but AI is already starting to reduce the cost and complexity of insurance.

Advanced Analytics and AI Help Insurance Carriers and Financial Services Work Faster

Insurance companies are using AI to replace traditional underwriting because AI can take into account thousands of data points at once (such as a person’s age or even their shirt color) before determining what type of policy they should have—one with low premiums and high deductibles versus one with higher premiums but lower deductibles. AI replaces much of the human labor needed in underwriting by examining a slew of information about an individual applicant—information such as his/her medical history, car ownership, shopping habits, income level and more. Insurers can then use AI-generated reports to determine how much to charge for coverage. For instance, AI can help companies determine pricing in the following areas:

How New Data With AI Voice Insights Give Better Customer Results

AI to improve customer experience: AI tools have the potential to reduce travel time and waiting at customer service counters. Instead of focusing on improving customer service by improving frontline employees, AI can provide customers with a better experience when they want it themselves. AI tools could be used to assess callers’ tone of voice and mood during phone calls with insurance agents before routing them to an appropriate agent for a discussion about a claim or claims processing. AI will also allow insurers to understand how they are interacting with their clients—the amount of time spent on each interaction as well as the words and phrases that resonate most with customers. AI data analysis will allow people who buy policies through their employers to better understand their benefits and guide patients on what care they need. AI tools can also be used as a way for insurers to communicate with customers about their policies, whether it’s through emails or texting. AI-generated language is more precise than human-written text and AI will send personalized messages in response to specific questions.

How Data Science Can Reduce Insurance Fraud

AI for finding fraud: Fraud costs the insurance industry billions of dollars each year yet companies find it difficult to detect fraud since they lack information about different people’s lifestyles or neighborhoods. AI allows insurance companies to gather data about these factors by collecting thousands of data points that are common among fraudulent activities—such as purchasing expensive jewelry, renting luxury cars or traveling to countries where health conditions may indicate that a patient is seeking care in the U.S. AI also allows insurance companies to analyze this data in ways that humans cannot, such as by looking at clustering of transactions and correlating them with individual or groups’ behavior on social media platforms such as Facebook and Twitter. AI can also help insurers determine if a policy is being canceled for false claims yet never actually submitted if a person is losing their health due to lifestyle choices versus a medical condition, and whether patients are submitting claims after leaving an employer’s group coverage plan—an illegal act not covered by the Affordable Care Act. AI could even be used to identify life insurance policyholders who were suspected of committing suicide before claiming their benefits.

AI to improve efficiency: AI tools could help insurers improve their pricing by analyzing the effectiveness of the AI-generated pricing reports. AI allows companies to predict individual behavior better and use data analysis to eliminate discrepancies in policies that customers may not be aware of, such as if they are paying more for a policy than a different customer because of location or other factors. AI will also allow insurance providers to invest in research and development activities such as improving technology infrastructure or getting money back from Medicare/Medicaid fraud without having to increase their premium costs.

Organizations optimize customer experience based on search history

> AI tools can also create a win-win situation for companies since AI’s ability to gather large amounts of data is typically perceived positively by consumers—AI can provide them with personalized offers and make recommendations on how they can save money, for example. AI can be used to analyze information from social media platforms such as Twitter and Facebook and AI systems can then use this information to anticipate customer needs—for example, AI could look at a consumer’s Twitter feed and determine if they are going on vacation so it could send them an offer for travel insurance or a recommendation that the customer is not getting enough sleep so AI could recommend them signing up for an auto insurance policy with lower liability limits.

AI will also help insurers in their product development efforts by creating models that include different price points or new benefits offered by competitors. AI tools can create visualizations of these designs for managers to visualize in order to make more informed decisions about what features should be included when designing policies down the road. AI can also help insurers save money by reducing human error since AI is not easily swayed by emotions like humans and AI can use algorithms to effectively handle customer traffic during different peak times of the day, such as weekends or holidays. AI tools are also easier to scale than humans since AI machines work around the clock and require less space for storage.

How An Insurance Company Can Speed Up the Capabilities of Selling Better

> AI tools could even be used by consumers for free in order to compare what insurance policies they qualify for based on age, location, health information, and other factors. AI could calculate a customer’s premium without having him submit any data if he would prefer this method—or AI could automatically submit his application with all relevant information including income details so that he does not have to provide any information manually. AI could help consumers make better decisions about purchasing insurance since AI would save them time by analyzing the details of several policies for them in a matter of seconds and AI could find coverage that fits their lifestyle or financial circumstances best since AI does not have emotional attachments to certain policies, unlike humans.

AI could also be used to create chatbots, which are particularly useful for younger generations – AI-based virtual assistants who can communicate with customers through text or voice applications and answer questions regarding insurance products as well as other services provided by an insurer. AI is especially useful for these purposes since it can understand non-standard terms; AI will even learn from past interactions and improve over time based on new information gained from real conversations it has with customers. AI can also use AI-powered robots to engage in conversation with the public and hear their needs firsthand, which AI can then use to develop new insurance policies or products that better meet the needs of consumers.

Digital Chat Bots Remove The Need To Have a Team Cover Online Network

> AI technology will most likely be first used by insurers to replace human activities like underwriting and customer service since these tasks are highly repetitive and many companies have already replaced human drivers with self-driving cars—AI is perfectly suited to perform these kinds of jobs since AI does not get bored doing the same task over and over again and AI has proven that it can easily recognize what humans cannot, such as whether someone is really sick or if they are just pretending in order to receive medical care. In fact, Aon Plc is already using AI to help determine which claims should be denied and which ones should receive payment, which has already helped their company save time and money while helping them provide a better service for customers. AI tools can also read doctors’ notes directly from medical records or electronic health records—instead of having to call in a doctor for each claim—which will likely happen within the next 10 years.

AI is revolutionizing the insurance industry in a number of ways, from AI-powered chatbots and AI tools that can read doctors’ notes to replace traditional underwriting. This article provides an overview on how AI could be used for insurers' benefit by replacing human activities like customer service or denying claims faster than humans ever could—AI also has many other benefits that we have not covered here such as AI's ability to learn from conversations with customers over time based on new information gained during these talks.

In conclusion, AI will most likely first replace human tasks within the insurance industry before it makes decisions about what products are best for consumers; AI may even help people find the coverage they qualify for without having them submit any data at all if this method would be preferable to them. AI will save customers time by analyzing the details of several policies in a matter of seconds—instead of hours—and AI can find coverage that fits someone’s lifestyle or financial circumstances since AI does not have emotional attachments to certain policies unlike humans do, which could be useful for younger generations who are more likely to use AI-powered chatbots.

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John Espenschied is a long-time veteran of the insurance industry. He's worked with thousands of clients over the years, helping to protect their personal and business needs. John's goal is to provide the best advice possible to assist customers in saving money while protecting their property and securing their financial future.
He truly enjoys helping others and takes great satisfaction in providing top-notch customer service. When he's not working, John has fun spending time with his family, golfing, bike riding, and blogging on insurance topics.