Credit ratings agency AM Best has revealed that it expects to see more advanced and specialised conversational AI developed over the near term to handle more complex situations across the insurance industry.
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As many are aware, insurers have been very active by adopting AI for customer service via conversational AI, which
is based on natural language processing and allows both the customer and the insurer to interact through chatbots and voice assistants.
Moreover, Best also flags claims handling as a key area in which AI tools can play a major role in the industry, as the tools can assist claims adjusters with image recognition and extracting information from medical records.
AI technology possesses the abilities to analyze large amounts of historical data, which it can then use to make plausibility assessments, ensure quality and uniformity in the adjusting process, and ultimately help adjustors summarize data and generate a preliminary report.
A highly beneficial aspect of AI is that it can also be used to analyze large amounts of data to spot unusual patterns as an indication of fraud, which can be very useful for companies. The technology may also detect manipulated images or patterns of behavior, which could lead to further investigation.
Moving forward, Best showcased how insurers can use AI to customize policies for each of their customers’ needs, for more tailored policies with potentially lower premiums and greater flexibility in coverage limits.
“AI could also help cut costs and generate savings for customers. And by being able to analyze large volumes of data in a short period, AI could provide real-time risk assessments and make for faster decision-making, allowing companies to respond quickly to market changes and offer pricing that is commensurate with the underlying risk,” AM Best said.
Interestingly, this is already being seen across cyber insurance, where insurers are using advanced technology to scan
customers’ IT systems to evaluate their vulnerabilities, and appropriately incorporate them into their decision-making.
Best also explained that using AI to replace human interaction during the underwriting process can be another way for
insurers to take advantage of building intelligence into the process, in order to allow underwriters to use their time more effectively. By simply allowing the system to take on many of the light tasks, this keeps human attention dedicated to the more complex tasks within the final decision process.
Additionally, AI can also detect potential problems and minimize human errors before they end up becoming more significant.
Best provided an example, where AI can help reduce administrative costs associated with the underwriting process. AI-driven systems can automatically process customer applications and identify any key risk indicators that may be missed in a manual process. As a result, this reduces time and errors associated with traditional underwriting methods.
“The industry has always leveraged technology and AI in its analysis, so the use of machine learning is nothing new. What is new is the speed of development of AI and its associated capabilities, so keeping abreast of these developments will be critical in the years ahead,” Best said.
Best also said that by seeing further improvements in AI – including advancements in generative AI – it may eventually change the way the world does business.
However, Best warns that for insurers, AI could pose significant challenges related to regulatory constraints and privacy laws, as well as the prohibited use of certain data in the underwriting process, and technical challenges related to insurer legacy systems and the large investment of time, money, and experience required.
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