Pardon This AI Disruption. Customers Ahead.
When it comes to AI, the insurance industry is still in its early stages and for very specific use cases. As such, AI is often perceived as undefined, a “black box”, whose meaning is so vague that its full potential and implementation have yet to be determined. So, let’s shed some light on how AI can accelerate the insurance industry from where it is today to where it can be and the implications of such a shift.
As defined by NAIC, Artificial Intelligence (AI) is a technology that enables computer systems to accomplish tasks that typically require a human’s intelligent behavior. These include gathering information, analyzing data by running a model, and making decisions[1]. Human intelligence is one thing, but human capacity is quite another, and with the volume of data generated in the world, it is no longer possible to handle it all while meeting customers’ demands and standards. This is where AI comes in to bridge this gap. In this paper, we’ll look at seven shifts AI can achieve for the insurance industry.
1. From Customer-Centric to Hyper-Personalization
The 2019 World Insurance Report[2] tackled the privacy issue head-on and surprisingly discovered that 37% of policyholders worldwide said they are willing to share additional personal health-related data for the purpose of risk control and prevention services. Policyholders also say they would be more likely to stay with an insurer – and share data – if it provides wellbeing added value services.
According to Global Data UK 2020 Insurance Survey, 70% would consider sharing wearable data if offered a financial incentive by insurers.[3]
With policyholders more open to sharing personal data in exchange for services, AI becomes a substantial player. When AI gets integrated, a new standard of customer engagement can be achieved, with hyper-personalized content and tailored services with hybrid sales processes where customers enjoy both automated online services along with an in-person option. AI will enhance customer-centricity with hyper-personalization of customer engagement.
Such customer engagement over preferred channels, focusing on content that is relevant to them, will increase loyalty and bring about the development of insurance ecosystems where complementing added-value services are part of the new standard.
Hyper-personalization will go beyond relevant content and offers; it will result in new business models as well as a shift from recurring payments to pay-as-you-go systems.
2. From a Bureaucratic to a Seamless Process
Consumers – especially younger ones who will be the market leaders of tomorrow – expect immediacy in every interaction, purchase, or engagement. They also expect everything to be effortless, convenient, and personalized so they can communicate and push things forward anytime and anywhere. The insurance industry has sometimes been perceived as a “higher authority,” a “protector” rather than a service provider, and as such was exempted from such consumer expectations. This, however, is no longer the case. With the digital transformation and social media flattening the concept of “higher authority”, insurers need to step up and meet current demands as a service provider or they will not survive the changes to the market.
Using AI to meet today’s demands and deliver effortless immediacy based on individual needs elevates the consumer’s journey to a new level. Accurately matching immediate, precise offers and engagement methods with the customer’s needs with a single click will also create a new consumer mindset and experience.
In this new reality, consumers no longer feel they are paying unnecessary insurance premiums; rather, they are paying for a service that is specifically tailored to fit their lifestyle and everchanging needs.
3. From Vagueness to Certainty
Unfortunately, most consumers have only the vaguest idea what their insurance policy actually covers and under what conditions. The truth is, insurance policy should be reviewed every few years and updated as needed. Insurance policies should mirror our lives, health conditions, lifestyle, property, business, children, and even pets. Life is never static and insurance policies should be updated accordingly.
AI will bring certainty to both consumers and insurers through constant data analysis of each and every consumer, including changes in behavior patterns, life status, health condition, property etc. and automatically suggesting relevant policy changes and updates.
4. From Chaos to Coherence
We can all relate to the aggravating scenario whereas customers we experienced the bureaucratic process of needing to repeat information that we already provided. As a result, customers’ trust and patience are lost and the delicate expected customer-service provider relationship is undermined.
AI will cover all consumer- service provider data loopholes and gaps to create a coherent, chronological consumer story that can easily be picked up by the insurer at every touch point and swiftly direct the consumer to the next phase of the process. In addition, it creates an additional layer of reliability and speed for straight-through processing (STP), leading to greater efficiency as well as convenience.
5. From Missed Opportunity to Contact at Every Touchpoint
Contrary to banks, telecom, utilities and other service providers where contact is on a monthly, weekly or even daily basis, insurance has far fewer touch points, making every contact count.
AI-based chatbots provide customers with immediate engagement at first contact.
Since contact with insurers is infrequent, it is essential to make every engagement count. AI can convert customers’ data and behavior from social media, electronic health records (EHR), telemetry devices, and genome websites into actionable insights, optimizing every touch point. Still, a big question is how to ensure a “personal touch” and maintain customer loyalty. This will largely depend on the specific line of business, as we see different customer behavior in each one. However, reviewing, analyzing, and extracting relevant information from such a vast pool of data, in real-time with minimal risk, can only be achieved via AI.
6. From Data to Insights
As much of our personal and business lives are conducted online, more and more data is being generated. COVID-19 has only accelerated this and along with devices such as mobile phones that constantly generate and transfer data back to organizations such as retail brands and social media platforms, as well as insurance, banking, healthcare, and credit card companies. Human capacity will never match the data volume generated by our devices. Furthermore, there is also the human error factor that significantly affects bottom- line results. According to the American Medical Association, health insurance companies are averaging a 19.3% error, resulting in losses of $17 billion annually[4]. These numbers just keep rising with the volume of data.
AI technology has the potential to solve these problems. To take data, analyze it, and generate insightful and actionable insight in just minutes. In fact, today, more and more car manufacturers integrate sensors in their cars that transmit car and driver information to relevant parties such as insurance companies. One result is UBI (usage-based insurance), where risks are automatically calculated to generate a precise, tailored insurance policy in minutes.
Take a car accident, for example. The car’s sensors immediately send a damage assessment to the claims department, along with pictures taken by the driver, and the claims process is set in motion. All automatically, accurately, and swiftly.
A second use of sensors to generate data with insurance implications is the Internet of Things (IoT). In this case, all sorts of household devices from air conditioning to lighting to home security are connected to a network, generating data on usage and user.
Cybersecurity is another area in which the vast volumes of data can be leveraged by AI to glean insights into risk, fraud, and the verification of authorized users. The potential savings and benefits for insurers and consumers can hardly be overstated.
7. From a Passive Insurance Organization to an Active Companion
Traditionally insurance companies have always taken a reactive approach to any incident. Whether it’s a car accident, a health crisis, or property damage, it’s always up to the consumer to take the first step. To pick up the phone, to be put on hold, to finally relate to customer service, or an agent if available, to provide information, to confirm that it was all received, to wait, follow up and hope for the best.
With AI, insurers will take the “front seat.” They will obtain data “live” from the scene of the incident, deciphering, analyzing, and leveraging it to actionable insights, presenting relevant offers and upgrades to consumers, calculating risks, and meeting consumers at every touchpoint and seamlessly taking them to the relevant next phase of the process. All this converts the insurance organization from a passive mode to an active mode where no consumer is left behind.
Summary
With 60% of the world’s population being online, the last few years have witnessed new records of data being generated, with less than 3% of it being analyzed[5]. It is no longer within human capacity to handle such data volumes. Furthermore, the digital transformation is well underway and the race to meet customers’ demands leaves no alternative but to join this transformation with full steam ahead. The younger generations – the insurance consumers of today and tomorrow – expect nothing less than instant response.
To stay ahead of the game, insurtech platforms need to integrate AI either internally or via APIs that enable AI integration.
It is with this in mind that Sapiens develops insurtech platforms to power insurance forward, enabling insurers to successfully change and adapt, to thrive through the transformation of our time.
Read about STRIKING THE RIGHT BALANCE OF ART AND SCIENCE WITH CLAIMS AUTOMATION: Blending Automation with the Human Touch by Karen Furtado, Partner, Strategy Meets Action (SMA).
Learn how Sapiens uses advanced automation to help insurers strike the right balance.
[1] NAIC: Artificial Intelligence
[2] Capgemini World Insurance Report 2019
[3] Top Trends in Insurance 2022 Ebook
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Hagit Ashkenazi Hagit Ashkenazi is head of NA Customer Success at Sapiens and has more than 35 years of technology experience, serving customers in multiple capacities and building great rapport with them. Hagit has over a decade of experience in the NA Insurance Services market.