Zywave: How AI is changing the insurance industry’s reputation

Insurance is often regarded as a necessary evil by consumers – a boring grudge purchase to protect themselves against an unfortunate event that may never happen.

And many consumers suspect that the insurance company has plucked numbers out of the air to price a policy, with rates seeming to fluctuate arbitrarily.

But with the help of AI, insurance is poised to change its reputation.

Greater transparency increases consumer trust

Much has been written about the potential of artificial intelligence to revolutionize the insurance industry but little has been mentioned about a vital element of our sector: consumer trust.

AI has the capability of quelling suspicions once and for all as it has the potential to generate more transparency regarding pricing and coverage, leading to greater consumer trust in the industry.

AI can offer total data transparency, so the consumer knows exactly why they are being sold a particular policy and why it is that price.

Meanwhile, the AI curated data gives the broker more credibility, allowing them to confidently justify their pricing. And being able to see the data that informed the pricing for themselves means the consumer trusts the broker, leading to a better long-term relationship.

There’s no doubt that greater transparency in risk profiling helps consumers understand insurance better.

AI can allow consumers to find out details about their home insurance, such as the typical coverage for a property of a certain size and location, the likelihood and frequency of catastrophic events and the loss usually incurred. In the same way, businesses can be shown the data about their cyber risk and the loss that would follow based on real world cases.

Sifting through unstructured data

Today, there is a great deal more data available to increase underwriting efficiency and tailor policies. Motor insurance companies are already gathering data from cars about driving habits, with careful drivers receiving a discount. But sorting through enormous amounts of data is time-consuming and error prone.

Rather than an underwriter wading through data, an AI can be asked a specific question and extract the relevant information in a fraction of the time, freeing the insurance professional to carry out more consumer-facing, value-added work.

As well as improving underwriting, risk management and pricing, AI is useful for compliance as it can read hundreds of pages of densely detailed policy documents and determine constraints that apply to specific policies. It can also monitor rapidly shifting trends in the market, allowing brokers and insurance companies to respond more quickly.

AI can also make sense of unstructured data in sales, such as analysing information about companies: what policies they buy, who they buy it from, what sort of coverage they already have. AI can score this information from a sales perspective to help the broker decide which companies to target and identify any gaps in coverage.

AI can arm the broker with data about what marketing campaigns work best for certain companies, what social media and websites they click on, the sort of emails they respond well to, and the key points to make in a sales pitch.

Change is gathering momentum

Our industry is often accused of being slow to change, but the AI revolution in the insurance space is moving more quickly than many anticipated. We have already seen how AI can automate processes to facilitate workflows, reduce human error, increase productivity, and improve customer service.

Insurance was slower to digitize than the greater financial sector that paved the way, doing all the hard work of data integration back in the 1990s and early 2000s. But our industry is now catching up and using the latest technology to potentially leapfrog over financial services. AI will undoubtedly provide insurance with a more significant increase in productivity than other sectors, simply because we were originally behind everyone else.

With AI on our side, the insurance industry’s reputation will continue to shift toward trust, transparency, and technologically advanced.

By Doug Marquis, chief technology officer, Zywave.