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AI in insurance: Building on the customer-first approach

AI in insurance: Building on the customer-first approach

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The emergence and fast-growing adoption of digital platforms, mobile apps, and big data have resulted in customers demanding quicker and more effective service than ever before. Today consumers have high expectations of an enhanced level of service from the moment they buy a policy until the settlement of a claim. These changing paradigms have strengthened the insurance sector’s technological interventions, and Artificial Intelligence (AI) is one of those promising technologies that holds a great future in enhancing customer experience. Ram Ramachandran, Senior Vice President and Head, Middle East and Africa, Tech Mahindra, explains that once applied in sanctity, AI can truly transform the insurance landscape by making it faster, convenient, and future-proof for insurance companies and customers.

Ram Ramachandran, Senior Vice President and Head, Middle East and Africa, Tech Mahindra.

Insurance technology (InsureTech) has captured the interest of private equity and venture capital firms, as is evident from the consistent increase in InsureTech investment activity. Global players are innovating across the value chain by implementing Artificial Intelligence (AI), Internet of Things (IoT), drones, and Blockchain in underwriting claims prevention and enhancing customer support. AI offers incredible opportunities across the entire insurance value chain, from marketing to underwriting and claims management. The GCC is one of the world’s fastest-growing markets and in the coming years, AI will significantly contribute to the GDP of GCC countries, with Saudi Arabia garnering the most significant gains.

AI technology speeds up human work by repeated algorithms and aids in automating the work through computer systems without requiring human intelligence. Furthermore, AI helps in faster claim settlement, reduces the rate of fraud, and improves the market efficiency of the insurance sector. Moreover, the expansion and adoption of AI has rapidly increased due to rapid growth in consumer data and massive penetration of insurance products. Therefore, the rise in AI adoption in the insurance sector reduces the cost of operation and boosts the AI in insurance market growth.

While almost all industries have succeeded with AI or have started investing in AI, the insurance industry lags substantially. With the advent of InsureTech start-ups and technology incumbents, the scenario is fast changing now as they can deliver faster claim payments, greater price transparency, and on-demand policies, while simultaneously reducing costs and resources required. The changing dynamics open huge opportunities for the AI-enabled insurance landscape globally.

Enriching customer experience

When it comes to improving customer experience, data is everything. IoT devices have opened new channels for insurers to gather data to give them valuable insights into customer demands and risks related to customer behaviour and external factors. And AI-based analytics boosts insurers’ ability to make sense of this data and apply it to actuarial sciences.

Crucially, this enhanced level of data gives insurers the power to track consumer behavior and reward it through incentives such as lower premiums. In the past, premiums were calculated based on location, with data only available at the level of zip codes. Now, thanks to AI, firms can take a more granular approach and more accurately calculate premiums that are specifically customised for each customer.

Insurers apply data analytics to identify pain points in customer interactions and facilitate making the customer interaction process more fluid and personalized. Some insurers have also started cross-referencing call center recordings with chatbot data to acquire insight into customer sentiment and boost agent service quality.

This renewed thrust on personalisation has offered a new lease of life to the insurance sector. These policies allow customers to customise coverage down to even a single item, such as a camera or smartphone, or a single event, like a short-term renter’s insurance for the length of a vacation stay. How do we gain access to such refined data? Well, chatbots, virtual advisors, and voice neural interfaces have created a more seamless, automated, and personalised enrolment experience in recent times. Insurers are deploying machine learning and behavioral science to speed up the process, rather than waiting for the applicants to provide information and sign documentation. Such an approach allows customers to enroll for any insurance policy in as little as 90 seconds and get claims processed, through a smartphone, in less than three minutes.

Additionally, customers need a highly transparent insurance scheme, which is easy to understand, and quick to access. To help them achieve this objective, insurers are increasingly deploying AI-powered platforms that substitute human input through features such as automated product recommendations and query resolutions by chatbots. Insurers are also better positioned to scan medical records, data on surgeries, and hospital stays through cognitive Machine-Learning (ML) tools to calculate pay-out. Besides, these technology tools, aimed at speeding up the claims process, are concentrated on providing convenience to customers and lower the cost of processing those claims for insurers.

AI-powered claims processing, along with other emerging technologies such as IoT and Blockchain, is expanding the scope of the fraud detection capabilities of insurance firms. For instance, AI and ML-powered algorithms utilise anonymised data to generate nano-segments of actionable insurance risk behaviour based on modelling the interaction between the customer and the policy. These insights enable providers to create top-line revenue by identifying approaches with potential for upselling or cross-selling, improving retention rates, reassigning orphan policies, and optimising their books of business by generating real-time visibility of their risk portfolio. Real-time visibility into risk portfolios empowers executives to understand current lapse rates and surrenders better, encourages them to reconfigure pricing and product bundling, and objectively and scientifically determine its accurate reserves and capital requirements.

Future beholds

The pandemic has made people realise the importance of life insurance, which was evident from a sudden massive spurt in the number of life insurance or critical illness cover purchases in the UAE in recent times. According to the International Data Corporation (IDC), spending on cognitive and AI systems will touch US$77.6 billion in 2022, with a significant amount of that investment focused on conversational AI applications such as chatbots and deep learning and Machine Learning applications. These investments can save auto, property, life, and health insurers almost US$1.3 billion while also decreasing the time to settle claims and improving customer loyalty. With such promising potential, AI in insurance is undoubtedly going to be a game changer shortly.

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