P&C insurers have long recognized that the claims experience for clients, agents, and brokers is a “make or break” factor in customer satisfaction and retention. An EY study confirmed this when it discovered that 87% of customers said that claims processing effectiveness influences their decision to renew the insurance with the same carrier.[1] This is important as retaining existing customers is significantly more cost-effective than acquiring new ones. Although the insurance industry has generally taken a more conservative approach to the adoption of cutting-edge technologies, carriers in recent years have turned to automation, driven by advanced technology, to increase efficiency and enhance the policyholder and agent/broker experience. But the real disruption in P&C claims has occurred over the last 3-4 years due to the advent of AI and machine learning (ML) technologies. Given that many carriers have access to large amounts of data, AI- and ML-powered algorithms can analyze carrier data to make predictive pricing suggestions, automate mundane, non-value-add tasks, and predict the likelihood of natural disasters, enabling insurers to adjust their exposures by line of business in certain geographies. And that’s just the start.

For an even deeper dive into seeing how AI can contribute to P&C claims disruption. I consulted with an actual primary source, none other than AI’s solution of the moment, ChatGPT, to get the AI perspective. (Answers have been condensed and edited for clarity.)

Q: In P&C insurance, customer loyalty is based primarily on the claims experience. How does AI improve upon this critical touchpoint for P&C insurers?
A: AI plays a crucial role in improving the claims experience for P&C insurance customers, namely through the following features:

  • Faster Claims Processing. AI can automate various aspects of claims processing, such as data extraction from claim forms and documents, reducing manual work and expediting the overall process. This means policyholders receive payouts more quickly.
  • Automated Damage Assessment. For auto and property claims, AI can analyze photos, videos, and sensor data to assess the extent of damage accurately. This reduces the need for manual inspections and accelerates claims resolution.
  • Fraud Detection. AI algorithms can analyze historical data and real-time information to identify potentially fraudulent claims. By preventing fraudulent payouts, insurers can maintain lower premiums for honest policyholders, which can increase loyalty and subsequent customer retention.
  • Predictive Analytics. AI can leverage predictive analytics to assess the severity and legitimacy of a claim based on historical data, enabling insurers to allocate resources more effectively and ensure a smoother claims process.
  • Personalized Customer Service. AI-powered chatbots and virtual assistants can provide 24/7 support to policyholders, answering their questions and guiding them through the claims process.
  • Claims Triaging. AI can automatically triage claims, determining which ones require immediate attention and which can be processed with less urgency. This ensures that critical cases are addressed promptly, enhancing customer trust.
  • Improved Customer Communication. AI can send automated updates and notifications to policyholders throughout the claims process, keeping them well-informed.

Q: What are the potential risks in automating/disrupting the claims experience for insurers?
A: Some potential key risks to consider include:

  • Data Accuracy and Integration. Automation heavily relies on accurate data. If the data sources are outdated, incorrect, or incompatible with the automation system, it can lead to errors in claim processing.
  • Privacy and Data Security. Handling sensitive customer information and claims data requires robust security measures. Automation can increase the risk of data breaches if not properly secured. Furthermore, compliance with data protection regulations, such as GDPR or HIPAA, becomes crucial, and any mishandling of data can lead to legal and financial consequences.
  • Customer Trust and Communication. Over-automation may lead to a lack of personal touch, making customers feel neglected or undervalued. A balance must be struck between automation and maintaining meaningful customer interactions.
  • Claims Fraud. Fraudulent claims can be more challenging to detect in automated systems. Insurers must implement advanced fraud detection algorithms and processes to mitigate this risk.
  • System Failures and Downtime. Technical glitches, system outages, or cyberattacks can disrupt the claims process, resulting in delays and customer dissatisfaction. Insurers need robust backup and recovery plans to minimize the impact of system failures.
  • Customer Experience. While automation can enhance efficiency, it should not sacrifice the overall customer experience. Poorly designed automated processes can frustrate customers and lead to customer churn.
  • Initial Implementation Costs. Implementing automation systems can be expensive, and it may take time to see a return on investment. There may also be upfront costs for technology, training, and system integration.

Intrigued by ChatGPT’s responses, I decided to pose the million-dollar question: Is it worth it for insurers to truly disrupt the claims experience with AI and ML?

A: Automating the claims experience with AI and ML can provide substantial benefits to insurers, making it a worthwhile investment. While there are upfront costs and challenges associated with implementing AI and ML in claims automation, the long-term benefits often outweigh these initial investments.

This response alone proves a real point about AI and ML: despite their efficiencies, advanced technologies cannot match humans in terms of nuanced answers and genuine perspective. As ChatGPT noted, automating the claims experience with AI and ML can offer significant innovations, including improved efficiency, customer satisfaction, and competitive positioning. But in the age of insurance disruption, it’s comforting to know that behind a business whose purpose is to protect people and property, lies genuine human ingenuity and a sincere willingness to serve other humans in their greatest hours of need.

To see how Sapiens’ next-gen solutions can empower P&C insurers to innovate and digitally address the needs of their customers, click here.

[1]Harnessing The Power Of AI In The Insurance Sector,”  Forbes Magazine, April 2023

  • chat GPT
  • North America
  • Property & Casualty
  • property and casualty
Andy Labrot

Andy Labrot Andy Labrot is Vice President of Product Management at Sapiens, responsible for leading several teams that deliver high-quality solutions and services to clients and managing the product portfolio of CoreSuite for P&C, which includes policy administration, billing, claims, producer management, and business intelligence. With over 30 years of experience in the insurance industry, Andy is a recognized expert in designing, developing, and implementing mission-critical core systems for global P&C and health insurance markets.