The robots are coming: how AI is taking over insurance

Othniel Konan Analyst at Elenjical Solutions

It’s now possible to handle an entire insurance claim without any human intervention – thanks to the use of artificial intelligence. Here, Elenjical Solutions’ AI expert Othniel Konan explains how AI is making insurance more effective, faster and cheaper.

In the old days, anyone unfortunate enough to have a bump in their car soon found that the process of claiming on the insurance was almost as painful as the crash itself. Registering the claim, then waiting for an assessor to come out to look at the damage and then haggling about the value before final settlement all took many weeks. Today, the whole process can be completed using modern technology and artificial intelligence in a fraction of the time and cost – and often with a better outcome for all concerned. This is true not just for auto claims, but for a wide range of insurance processes and categories. (Home, travel, personal injury etc.)

There are millions of insurance policies taken out each year, and many consequent claims. Most are relatively straightforward and yet traditionally they have been processed in a labor-intensive way. But by streamlining the data flows, these processes can be automated. ‘Bots’ can be used at the start of the process to gather the data, which is put on a central server where AI models verify and classify it and determine next steps, including if fraud is suspected. This doesn’t just help automate the process, thanks to AI and machine learning, the technology can make better, more informed decisions, improving as it goes and shortening the insurance premiums or claims lifecycle.

Facial recognition and damage assessment

Even site visits are needed much less, thanks to digital photography and video streaming on mobile phones. By standardizing the data needed the policyholder can provide much of the information required. Automation can even process images, thanks to machine learning AI algorithms they can be classified to evaluate the damage and quickly do an identity verification process. Incredibly, when it comes to damage, AI can ‘look’ at the images and make recommendations as to whether a repair can be made, the part replaced or mark it as beyond economic repair.

Using sentiment analysis and effective analysis AI can also make assumptions about the emotions of the policyholders. The technology can ‘listen’ for the tone of voice and make a probabilistic assessment as to whether the policyholder is telling the truth or not, useful in fraud detection. AI is in fact better than humans when it comes to fraud detection, spotting fake documents or doctored IDs to a higher standard than people, and continually getting better over time thanks to machine learning.

Data driven learning

Whether it be for health or home insurance – or anything in-between – the huge bank of data that is created over time allows AI to use what has happened in the past to determine present policies or claims, and make accurate assessments. The more data, the better AI performs. For machines and vehicles, onboard telematics (that record how they have been operated and therefore consumer behaviour) produce a vast amount of data that AI can use to determine how a claim should be processed. And unlike humans, AI doesn’t get tired, have off-days, feel sorry for people or like or dislike them – they just do their jobs impassively.

“AI will soon move from being a source of competitive advantage to an essential entry requirement for success.”

The move to digital

This move to online policy and claims handling was always going to happen, but Covid-19 has accelerated the transition, with almost all claims being handled online during the depths of the pandemic. This forces a standardization of information gathered, data that can then be interpreted by cloud-based AI technology.

Despite the great potential of AI, the human aspect of insurance is unlikely to be replaced entirely. But with AI getting better all the time it’s not impossible to imagine a time when we can’t tell the difference between talking to a human or a computer. It’s the stuff of science fiction.

The insurance industry is waking up to the potential of AI in revolutionizing policy and claims processing. With the potential for lowering overall indemnity costs, making continually better decisions and resolving claims far faster, the benefits of AI cannot be ignored.

AI will soon move from being a source of competitive advantage to an essential entry requirement for success.

Momentum Investments is part of Momentum Metropolitan Life Limited, an authorised financial services (FSP6406) and registered credit (NCRCP173) provider.