Blog
26 February 2024
AI in the world of insurance

Whether we like it or not, artificial intelligence (AI) is becoming part of life as we know it and the insurance industry is no exception. Despite historically being slow to adopt new technological processes, 63% of UK insurance executives were investing in AI in August 2023. But how exactly is it used in insurance, and what are the benefits? 

Underwriting

Machine learning software can help underwriters to draw up a more thorough risk assessment of a potential client. For example, natural language understanding (NLU) uses computer software to derive meaning from human language, rather than just interpreting individual words. For insurance, this can be used to scan the web for information about a potential client and then analyse it. This can sometimes pull details that the client had not initially disclosed, for fear of weakening their application. The underwriter can therefore accurately assess the risks of insuring a person and, in turn, recommend premiums that are tailored to that specific customer.

Pre-empting claims

Once a premium has been agreed, AI technology can then help insurance providers to anticipate situations which may cause claims to be filed. For example, Swiss Re uses software that predicts flight delays by analysing historical data. With this knowledge, the insurance provider can make faster settlements – sometimes without the customer even having to file a claim. Similarly, Allianz has a tool to track motor accidents either through sensors on vehicles or apps on user’s smartphones. The first notification of loss therefore happens automatically, and the insurer can initiate contact with the client.

Spotting fraud

Once insurance claims are made, AI can analyse data to detect patterns which suggest that a claimant is a fraudster. For instance, optical character recognition (OCR) could be used to extract text from images (eg. on a receipt or a scanned document) before NLU interprets that data. The technology can then highlight to the insurer any inconsistencies or discrepancies in detail provided by the claimant and witnesses.

Risks and uncertainties

Despite the ways in which AI can streamline processes for underwriters and insurers, it does inevitably also throw up questions. Firstly, since technology is being used increasingly to inform decisions about premiums and claims, who is ultimately liable for the choices that are made? The protection of data also becomes more complex. If AI is used by underwriters to retrieve information about a client, can it be guaranteed that the data being handled and exchanged is entirely secure? With AI developing at a pace that humans are struggling to keep up with, there is a risk of data being hacked and leaked if there has not been time to put robust security in place.

To conclude, while AI may be becoming the “new normal”, many say that the best way forward is to find a balance. Using artificial intelligence in tandem with human intelligence is likely to be the key to making processes more efficient whilst also maintaining a sense of integrity.