Live Chat

May I help you?

Begin Chat
Insurance Article

The Growing Usage of AI in the Insurance Value Chain

December 16 2019

Artificial Intelligence is disrupting the way insurers have gone about various processes – starting from sales and distribution to claims management and policy administration.

Growing usage of AI in Insurance

Artificial Intelligence (AI) is rapidly gaining relevance across the Indian insurance landscape. As its concepts mature with time, technologies like machine learning, natural language processing, neural networks and computer vision are disrupting processes across the fifteenth largest insurance industry in the world. Here, starting from sales/distribution, underwriting, claims management to policy administration, artificial intelligence is increasingly finding its application.

The recent regulatory sandbox initiative by the Insurance Regulatory and Development Authority of India (IRDAI) to provide a controlled testbed for emerging insurtech applications had been a step in the right direction. It is in sync with the ever-increasing need to integrate cutting edge technologies like AI into the Indian insurance value chain. Such adaptations have the potential to revolutionise the whole gamut of insurance business through:

1.Improved sales and distribution

At just 3.69%, as per the latest IRDAI annual report, insurance penetration had long been a cause of concern in India. In such a situation, AI-enabled solutions have proven to be a potent tool to expand insurance outreach. Today, from devising effective insurance marketing strategies, leading engagement campaigns to designing new insurance products based on customer behaviour insights, insurers have reaped the benefits of artificial intelligence.

The type of application may range from predefined rule-based Symbolic AI (SAI) to standalone Machine Learning (ML) systems. But inherently, the technology is fast emerging as a force multiplier, taking over repetitive, labour-intensive processes, limiting human intervention to supervisory roles. It is streamlining sales and distribution channels through:

  • Improved lead generation
  • AI guided, predictive data analytics can help insurers to target cases with high conversion probability. Insights, thus sourced, can help drive and continuously enhance the sales team’s efficacy at lead generation.

  • Enhanced salesforce potential
  • Collaborative platforms, like connected databases and advanced data mining techniques, coupled with Artificial Intelligence, can generate invaluable insight into customer behaviour. With access to this data, it becomes easier for insurance sales professional to pitch products with higher chances of satisfying client requirements.

  • Improving service standards
  • Keeping with a global forecast of 80% chatbot adaptation in business by 2020, these AI-powered platforms are leading the push for insurance service excellence in India. They cut down customer servicing costs by handling standard queries, ensures transparency in communication and reduces the customer grievance resolution cycle.

2.Better underwriting

Insurance underwriting, being a core business function, has been a prime beneficiary of AI-driven technologies. Shifting from limited manual underwriting processes, today, underwriters can leverage technologies like:

  • Deep learning algorithms
  • While attempting to mimic the reasoning and problem-solving abilities of the human brain, deep learning methodologies have given a new dimension to underwriting. Departing from traditional underwriting methods, they provide a multidimensional view of the risks involved by taking a deeper dive into the available data sources.

  • Natural language processing
  • Natural language processors gave a human face to insurtech. Now with the ability to directly understand the person it is communicating with, insurance business platforms can source information from the customer and populate client databases. The technology reduces the chances of error in data collection for risk assessment and serves as a virtual assistant to new insurance underwriters.

  • Customer behaviour models
  • Internet of Things (IoT) has given a fillip to AI-based insurance underwriting. Sourcing of real-time data from a network of physical sensors like on-board modules and wearable devices have not only led to a more realistic assessment of risks but also added a new dimension to insurance product design and pricing. Realising its potential, a committee constituted by IRDA, recommended the use of telematics in determining car insurance premiums in the future. The move is expected to promote fairness in pricing as it will enable linking of premiums with individual driving behaviours.

    3.Improved claims management

    Data-driven technologies powered by AI have overhauled the policy administration and claims management infrastructure. With more than 30% additional accuracy over manual handling, machine-driven processes are far more streamlined with reduced turnaround time and fewer exceptions.
    In claims management, AI has found both tactical and strategic applications in areas like:

    • Fraud detection
    • According to a study , Indian insurance companies lose more than USD 6.25 billion to fraud. Such losses impacting both the insurers and the bonafide policyholders argue in favour of setting up robust fraud detection mechanisms. With the emergence of big data analytics, it is possible to generate insights by churning massive databases like hospital records, criminal records, claims history and even social media activities. It allows insurers to run more in-depth background checks during claims verification and weed out possibilities of fraud.

    • Predicting claim patterns
    • The recent flood in Kerala or the fire in the Aero India parking, damaging over 300 cars, highlights the challenges posed by natural and man-made factors to insurance claims handling. AI-driven technologies, with their ability to assimilate diverse data sources, are better equipped in preemptive detection of spikes in the claims volume and pattern anomalies. It gives the insurers enough time to make provisions for handling such situations.

      Leaning from behaviour, such systems also helps in the optimal utilisation of workforce, allocating cases to team members with the maximum experience in handling such situations. The platforms can further flag cases in need of individual attention and with possibilities of escalation.

    Towards an ‘intelligent’ future

    Infusion of AI into the insurance value chain is an incremental process requiring changes in the domain of technology, corporate governance and service perception. Insurers in India have already set a few milestones with its innovative application in the health and car insurance verticals.

    Positive legislative interventions like the relaxation of the FDI regime and socio-economic factors like rising disposable income and preference of millennials are poised to influence the dynamics of the Indian insurance space. Players with the highest policy and technological readiness levels are supposed to make the most of the opportunities in this highly competitive market, forecasted to reach USD 280 billion by 2020.

    Related Article:

    AI Based Claim Approval
    Artificial Intelligence and Healthcare

Write a review