The Impact of AI in the Insurance Industry

understand the impact of AI on the insurance industryQuick question: how often do you interact with AI? If you’re like many Americans, you might not recognize just how many everyday activities use AI, from your email client flagging spam to your favorite customized music recommendations. AI is everywhere!

That’s true for the insurance industry as well, and this is mostly good news. AI may help with rising insurance costs, offer more predictive risk analysis, help users get instant answers about commercial insurance, and even allow customers to process personal insurance claims faster. However, it’s also safe to say that ensuring accurate and ethical use will be an ongoing challenge.

If you’re curious about how AI may impact the way your insurance works, read on!

Operational Benefits

At the moment, one of AI’s biggest benefits is that it saves time.

For customers, AI makes it easy to get quick answers without waiting to speak with an agent. We’ve already begun seeing AI chatbots help customers resolve issues fast, and these solutions are available 24/7. A human touch is still better for complex issues, but AI helps free agents up to deal with more of those issues.

For agents, AI means less paperwork, well, sort of. Small clerical tasks like filing forms are easy to automate, saving workers’ time. As a side benefit, AI may help minimize the risk of minor human errors on forms and files.

Faster and More Accurate Processing

The insurance industry deals with mountains of data every day. As the Internet of Things (IoT) expands, providers are even starting to get data from fitness trackers, smartphones, watches, and cars.

To analyze and wrangle all this data into something useful, workers harness the power of AI. Artificial intelligence can help track data, offer more predictive risk analysis, and much more.

For customers, this can translate to faster and more accurate underwriting. To help assess risk, AI can do things like dig into public data, scrape social media posts, and read SEC filings – and it can do it far faster than a human can. These tools create a quick dossier on applicants, helping human agents better assess potential risks.

The result is more accurate insurance rates, which is great for anyone worried about rising insurance costs! By minimizing the risk of human error, AI ensures that you always pay for only what you need.

Faster and more accurate claims are another benefit. When customers submit documents for a claim, AI can comb through videos, text, and images to compare them to the terms of the user’s policy.

This process is much faster, allowing customers to get the payout they need in hours, not days. We’ve already seen one provider set a world record for a two-second AI insurance claim!

Reduced Fraud Risk

Fraud is a constant issue in the industry. With cybercrime on the rise, personal and commercial insurance fraud is only getting more common. Worse, catching and dealing with this crime takes valuable time and attention from real customers who need assistance.

To catch fraud faster, providers have turned to AI. The right tools can analyze suspicious behaviors a human might miss, spotting red flags before they snowball into larger problems.

Missing the Human Element

It’s a common threat when anyone mentions AI: is it coming for your job next?

Right now, in the early stages of AI adoption, AI tools are only helping deal with agents’ menial grunt work. This frees them up to tackle big-picture tasks, work with customers, and oversee the results an AI returns. In the future, however, experts predict that some insurance jobs may be at risk.

However, it seems unlikely that human agents will be removed from the picture altogether. Though AI tools are powerful, they lack the compassion and bedside manner most of us prefer when making huge purchasing decisions. In the same way many of us still press zero to speak with a human during an automated call, it’s likely customers will still prefer doing business with a human agent over a computer!

The Risks of AI

Artificial intelligence is not without risks. AI language models are trained on specific content, which they later use to answer questions. The process is simple enough, but it has a few major issues.

First, when training data is problematic, it’s hard to guarantee the desired results. In recent news, we’ve seen AI models unethically trained on copyright material as well as biased training data that offers racist and sexist results.

Second, because AI makes assumptions faster than most humans, those assumptions can be hard to monitor and control. In some cases, an AI’s responses boil down to predictive text that’s heavily influenced by the training data.

In other words, AI doesn’t always know if it’s giving the right answer; it’s just predicting the most likely answer. In the worst-case scenario, AI models can “hallucinate,”  meaning they’re making up an answer based on faulty internal logic.

Oversight during the training period can help catch these problems, but what happens once an AI goes public with faulty logic intact? With no human around to monitor conversations in real time, it’s hard to say what an AI is telling users.

Minor hallucinations are fine for someone messing around on ChatGPT, but when AI is used to make predictions about insurance, the wrong decision could cause serious harm. Worse, it’s not yet clear who would be liable for an AI-based error. Is it the developer of the AI or the insurance provider?

Smarter Personal and Commercial Insurance

Here’s the bottom line: today’s AI is a great help when we need administrative tasks completed with speed and accuracy. However, providers will need to be careful when adopting it for larger tasks. Harnessing AI in ethical, safe, and accurate ways will be a major challenge in the coming years, but it’s one the industry will have to address to lower rising insurance costs and other current issues.

At Kicker Insures Me Agency, we make a point of staying on top of the latest insuratech trends, and we even use AI in some of our processes. However, you can continue counting on the compassionate, friendly human touch you’ve come to enjoy! If you’re looking for commercial or personal insurance, trust our experienced team to help you shop around and find the right provider.

To learn more, start your quote today.

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