Artificial Intelligence, commonly referred to as AI, has taken new steps in enhancing the functionality of insurance processes. Where risk assessment, customer service, and operational efficiency are paramount, AI plays a significant role in shaping the evolution of insurance practices – but what outcomes should we anticipate?

The fusion of AI and insurance not only promises to streamline processes, AI has the potential to revolutionize how insurance is conceptualized, distributed, and experienced. AI is transforming the insurance industry by streamlining operations, fostering innovation, and optimizing how coverage is administered.

| What Can AI Do That Is So Unique?

AI is not just an automated team member; it is an algorithm designed to assess, enhance, and fortify. Intended to act as a safeguard, AI is equipped with defensive strategies that aims to identify fraud, IP risks, malware, and misinformation.

“According to the CAIF, total losses due to [fraudulent activities] across the country are $308 billion, … [which is] drastically higher than the group’s $80 billion estimate in 1995.”

– Conroy Simberg, Insurance Fraud Costs the U.S. $308 Billion Annually

AI technologies offer a forceful weapon in the fight against fraud, enabling insurers to detect and prevent fraudulent activities more effectively. Advanced fraud detection algorithms can analyze vast datasets in real-time, flagging suspicious claims for further investigation. By identifying anomalous patterns and inconsistencies, AI models can uncover fraudulent behavior that may have otherwise gone unnoticed, ultimately reducing losses and protecting the interests of policyholders.

However, benefits come with risks. The ability to pull documents, craft employee policies, and even generate biases based on historical data has made insurers careful of the potential drawbacks of AI. Privacy concerns and regulatory challenges are widespread, and without proper protection, data becomes vulnerable and susceptible to fraudulent activites.

“Like any employee, AI must be onboarded to learn ‘how we do things around here.’”

– Michael (Fitz) Fitzgerald, Meet Your New Employee: Advanced AI

Despite the risks involved, AI offers numerous benefits, including the minimization of claim errors, enhancing the customer experience through information systems, simplifying regulatory compliance, and accelerating claims processing workflows through automation (Ricoh).

| What Will AI in 2024 Look Like?

  1. AI in Underwriting and Risk Assessment

Underwriting and risk assessment are now minimally affected by human error and bias with the advent of AI. Potentially, AI could open up carriers to resources to analyze extensive amounts of data, thereby enabling them to make more accurate assessments as a result.

Machine learning algorithms can analyze customer data (such as demographics, past claims history, and even social media behavior) to better understand and assess risk profiles, enabling insurers to tailor policies accordingly.

AI is expected to play a growing role in underwriting and claims management, leveraging its abilities to optimize policy pricing, shorten quote turnaround times, triage claims, and decrease the duration and cost of claims processing, all of which will reduce the chances of overall losses (Gradient AI).

  1. Advanced Integration

AI is set to revolutionize the insurance industry across various fronts.

Beyond its capacity to predict future occurrences using historical data, such as in severe weather or market trends, AI can also gauge the perceived risks associated with the insured, while optimizing their pricing based on voluntarily shared client data with the provider (Datrics). By harnessing this data, insurers can deploy the most efficient services, optimizing costs and saving time and resources for all parties involved.

Likewise, the involvement of AI underscores the critical importance of ethical deliberations in insurance. Achieving a balance between AI integration and human oversight is pivotal for maintaining transparency and accountability in handling user data. It is imperative for insurers to remain accountable and provide discretionary explanations regarding the usage of data.

| How Does This Affect Me?

Understanding the role of AI is paramount in today’s rapidly changing technological environment, especially concerning insurance practices.

Being mindful of potential privacy risks and equipping oneself with knowledge to advocate for one’s rights allows for informed decisions when engaging with any person or website. Ultimately, AI presents significant advantages for both policyholders and insurers alike, greatly impacting the overall success of claims processing, underwriting, fraud detection, and more. These advancements will ultimately improve and secure the way we all use insurance.

Wondering about your coverage options? Reach out to HAWK today!