This article is written by Rob Schumacher, co-founder of Feather Insurance.
The insurance industry is embracing AI adoption and is doing so at a faster pace than other industries. Applications of artificial intelligence in insurance range from automated claims processing and quote generation to advanced fraud detection and personalized agent training. But the next era of insurance is not the only area for AI. Combining AI technology with human judgment and expertise opens up new opportunities for insurers and their customers.
Reduce processing time and manage risk
One of the main benefits of AI is that it significantly increases efficiency. Insurance companies recognize this value. IBM found that insurance companies spend as much as 40% of their AI budgets on improving efficiency and operational effectiveness. Investments in AI are paying off, with insurers reporting an 18.6% reduction in claims processing time and a 15.45% reduction in product time to market.
In an industry awash in data, there are countless uses for AI and its vast data processing power. Task summaries and call summaries are obvious applications, but the real excitement comes from the introduction of generative and agent AI. Gen AI’s reasoning, judgment, creativity, and empathic abilities are proving critical to the future of insurance, assisting with a variety of critical tasks including real-time price analysis, accurate and personalized insurance recommendations, customer communication support, and “first notice of loss” insights.
Another area of particular value is risk management. Gen AI has the ability to support customer risk assessment, liability determination, and fraud prediction and detection, making it essential in an industry where UK insurers face more than £1 billion in insurance fraud each year. With criminals leveraging AI tools to create fake identities, forge documents, and bypass verification systems, it is imperative that insurers also make the most of modern technology.
maintain a sense of humanity
However, the end goal is not to replace all insurance companies with algorithms. It is the balance between AI and human knowledge that will improve the industry, and companies will need to invest in both advanced technology and human expertise to maintain it. The insurance industry is facing an aging workforce and a talent shortage. The UK's Chartered Insurance Institute estimated last year that a quarter of industry talent plan to retire within the next 10 years, while only 4% of young people find a career in insurance attractive. Attracting and investing in young talent, not just AI, is critical to the survival of companies and the industry as a whole.
Human oversight of AI processes is essential to ensure the tools are working as the company wants. But just as humans have a role to play in humanizing AI, AI can also help companies “humanize” and strengthen their connections with customers. McKinsey details how one insurance company implemented intelligent automation when providing quotes and selling insurance policies to prospective customers. As a result, 80% of transactions moved online and customer satisfaction scores improved dramatically. Another insurance company saw an 11% increase in the number of leads who proceeded to purchase insurance policies by leveraging a 24/7 chatbot to serve customers after hours. Another insurance company used AI to generate 50,000 claims-related communications each day and reported that they were clearer and more empathetic than those written by humans. All these examples demonstrate how AI can create more personalized and connected experiences for customers and significantly improve service levels for insurers.
Building a human-centered strategy
The next era of insurance is not one where decision-making is abandoned. It's a world where artificial intelligence and human intelligence are fused to create smoother, faster, and more accurate experiences. Successful AI strategies will be human-centric. We recognize that the goal of new applications is not technology for technology's sake, but to enhance the work of agents and refine the customer journey. The next chapter in this space will be about increasing efficiency, managing risk and streamlining operations, but also bringing a human touch to every interaction with customers.
