How do insurance companies use AI in 2023? Benefits and examples

The insurance industry has always been one of the most complex and intricate ones. A simple claim or quote often involves incredibly complicated calculations, risk assessments, and vast amounts of data. Being on the cutting edge, this industry is also known to be an early adopter of new technologies. Artificial Intelligence (AI) is no exception to that. In 2023, insurance companies already leverage the power of AI to help them in many areas of business, from speeding up the claims process to offering personalized policies based on individual data.

In this article, you will learn how insurers use AI, its benefits, risks, real-world examples, and more. Let’s dive in together.

How do insurance companies use AI?

AI helps insurance companies process vast amounts of data at lightning speeds, allowing them to make operations more efficient and customer-centric. Here are the main applications we see today:

Claims processing

Before, the claims process used to involve extensive paperwork and long waiting times. AI has now revolutionized this. By using image recognition, for example, damage-related claims can be completely automated. Advanced algorithms now assess the validity of a claim, and cross-reference it with policy details and historical data, ensuring a more straightforward resolution.

Risk assessment

Risk assessment is the art of crunching immense amounts of data into actionable insights. This has to be done fast and accurately. AI is extremely good at data analytics, making it ideal for this part of the process. With AI, insurers can offer their customers more accurate and tailored coverage and pricing.

Chatbots and virtual assistants

Just like every other consumer-centric company, insurance companies recognize the value of immediately available, 24/7 customer service. Tools like Chatfuel are embedded on their websites as well as social media and messaging platforms, giving customers easy access to assistance whenever needed. Powered by AI, these chatbots efficiently address queries, help customers in navigating insurance policies, and offer guidance through the process.

Personalized policies

By analyzing a customer’s data, AI can suggest tailor-made policies that fit an individual’s needs and lifestyle. What makes this possible is AI’s capability to process millions of requests simultaneously, as well as access to data and the digitalization of the insurance process.

Benefits of AI in the insurance industry

AI comes with many perks for both consumers and insurers. Let’s take a look at some of them.

• Efficiency. Process automation, natural language processing (NLP), and chatbots can all speed up insurance processes, saving both the customer and insurer precious time and reducing costs.

• Product innovation. The emergence of new technology allows for new products to be created around it. For example, usage-based insurance products, such as 'pay how you drive' models, are becoming increasingly popular. These products provide a more personalized insurance experience.

• Cost savings. Automation and improved accuracy mean fewer human errors and less manual intervention. This leads to significant cost savings for insurance companies.

• Improved customer experience. With instant responses and personalized policy suggestions, customers enjoy a smooth and tailored experience.

What are the risks of AI in insurance?

Of course, cutting-edge technology like AI can also come with certain risks. One of the main concerns is about data privacy. As AI algorithms handle vast amounts of personal data, the potential for breaches and misuse becomes a significant worry. Additionally, an over-reliance on AI might result in a diminished human touch, a crucial element for building trust, especially in a sector as sensitive as insurance.

Furthermore, as AI becomes more commonplace and more powerful, the industry faces the potential challenge of job displacements. Yes, AI will also create new jobs, but at the end of the day, those new jobs may not be enough to make up for those lost.

Another issue is the ethical implications of AI. Since AIs are trained by humans, and humans are biased, AIs could display those same biases if not properly calibrated. Biases can lead to unfair pricing and unjust policy rejections, which is extremely alarming for insurers.

Real-world examples of AI in insurance

1. Lemonade

This ‘Insurtech’ company was only started in 2015, yet it already has a multi-billion valuation. AI is not just a tool that they use, but in fact, their core competency. Their strategy was simple, grow fast and disrupt the market full of established players by offering delightful AI-powered experiences. So far, this strategy seems to be working.

Apart from excellent customer experience, with AI, they can offer plans that are 5 times cheaper than some of their competitors, generate policies in as little as 90 seconds, and much more. In one of their recent investor presentations, you can see the complex network of AI bots that Lemonade uses to serve their customers:

2. Snapsheet

This is not an insurance company, but rather a tool used by insurance companies. The claims processing software offered by Snapsheet has many AI-powered functionalitities, and is used by companies like Clearcover, IAT Insurance Group, Intact, and others.

One of the functionalities of their tool is virtual appraisals, which automates the process of assessing damage photos, filing claims, and even issuing payments. Another functionality is claims management, where their tool uses a mix of AI and workflows to provide a transparent and straightforward experience to their customers.

3. Sproutt

This life insurance company uses AI to match customers with the most relevant plans. Their quick 15-minute assessment is a delight to customers, who typically go through a lengthy process. Sproutt’s process takes into account the customer’s lifestyle, nutrition, and emotional health, which it then compares to the latest medical research to make recommendations.

4. Hutsenpiller Insurance

This family-owned insurance agency takes a page out of Lemonade’s book. As a local and independent insurer, they know that an excellent customer service experience and efficient communication are key to their business.

They use the AI-powered chatbot platform Chatfuel to ensure they are always available to help their customers. The chatbot is used on both their website and Messenger, making it convenient for potential clients to contact them anytime.

What is the future of AI in insurance?

The insurance industry will only get more and more intertwined with AI. We can expect that insurers will increasingly provide tailored coverage options, real-time automated claims management, and expedited settlements using visual recognition and advanced algorithms.

As AI evolves, it will improve at predictive analytics, enabling insurers to anticipate risks and adjust policies even before events occur. Furthermore, integrating IoT devices, such as smart home systems and wearables, will provide a continuous flow of data, allowing AI systems to adjust premiums based on real-time behaviors.

However, the insurance industry will also have to battle certain challenges. They will have to adhere to strict data privacy laws and ensure their tools avoid bias or ethically questionable decisions.

Overall, this journey won’t be easy but will certainly be rewarding. Both insurance providers and customers will experience the rewards of AI in the next years and decades. But with all the advancements AI brings to the insurance sector, it’s essential for companies to have the right tools to harness its potential.

Embrace the future of insurance with Chatfuel

The future of insurance will undeniably be shaped by AI, offering a multitude of opportunities to improve customer experience and operations. Those embracing that reality are already reaping the benefits, so what are you waiting for? Don’t wait for the future when you can be part of the revolution now.

Chatfuel’s AI-powered chatbot is designed to integrate seamlessly with your website and messaging platforms, providing real-time assistance, efficient query resolution, and personalized touch to your customer interactions. The setup only takes minutes, which includes training the AI on your existing documentation and policies.

Embrace the world of AI, start a free trial with Chatfuel today.