Benefits and Risks of Artificial Intelligence in the P&C Insurance Industry

Artificial intelligence (AI) enables computer systems to accomplish tasks that normally require intelligent human behaviour. Examples include information gathering, data analysis and decision-making. It’s currently being used in customer service, claims processing, underwriting and fraud detection. Many insurance firms and carriers are also using it for job postings and hiring.

You may have seen natural-sounding chatbots that give basic advice, check billing information, and deal with common inquiries and transactions. Different stages of the claims process can be augmented with AI to quickly assess the severity of damages and predict repair costs using historical data, sensors and images. Insurance companies have begun to harness AI to create better underwriting models and fraud detection methods as well.

AI can leverage big data to create more personalized services. It can help you target customers with more meaningful marketing messages and offer the right products. But it has its risks. First, let’s look at some of the benefits. Then we’ll address the downsides.

Pro: It creates efficiencies

Ultimately, AI can make your life easier by automating processes. For instance, AI can automatically classify documents and records based on the line of coverage, location, policyholder, etc. Additionally, it can generate customized contracts, automatically filling them with customer information. AI tools can also improve the buying experience for your customers. They want upfront, transparent information, and AI can provide that.

Pro: It’s modernizing the insurance industry

AI’s underlying technologies are already being used in our businesses, homes, vehicles and wearables. Four core technology trends tightly linked with AI will likely reshape the insurance industry over the next decade.

Connected devices: Connected consumer devices, such as cars, fitness trackers, home assistants, smartphones and smartwatches, will continue to increase rapidly. They will soon include new categories, such as clothing, eyewear, home appliances and shoes. All of the data these devices generate will allow insurance companies to understand clients better. This will lead to more personalized pricing and gradually more real-time service delivery.

Robotics: In the next decade, autonomous drones, self-driving cars, autonomous farming equipment and enhanced surgical robots will be commercially viable. 3D printing is already reshaping manufacturing and, by extension, the commercial insurance products needed to insure the industry.

Cognitive technologies: Cognitive technologies will become the standard approach for processing large and complex data streams generated by insurance products. These will be tied to an individual’s behaviour and activities. New product categories and engagement techniques will emerge in response to shifts in underlying risks or behaviours in real time.

Recruiting and hiring: AI is already being used to craft job descriptions and filter employment applications. This can help HR teams more efficiently select candidates for interviews. It can also help them target particular kinds of students or professionals through social media and direct outreach.

Con: It can discriminate

While AI is playing a bigger and positive role in underwriting, fraud detection and distribution, it has also generated some concerns for users and insurance companies. For example, AI can generate stereotypical results. Remember, its output is based solely on its inputs. The data fed into the AI program may yield broadly accurate results, but those results might not accurately reflect individual behaviour or performance. Using flawed data can get a business into serious trouble.

Con: It can distort evidence

AI is also capable of distorting evidence. For example, AI allows users to craft and edit video, still imagery and sound files. This means “evidence” submitted for claims processing or lawsuits might be falsified. As AI improves, these so-called “deepfakes” could make it more difficult to discern the truth.

Con: It can violate copyrights

If you use AI to create marketing materials, beware of intellectual property and copyright infringement. AI programs get all their information from somewhere. If you don’t properly cite or license your content, you could face a wrongful use lawsuit.

AI is becoming increasingly pervasive in all industries. To remain relevant, you must understand its uses and its risks.

This content is for informational purposes only and not for the purpose of providing, financial, medical or legal advice. You should contact your attorney, doctor, broker or advisor to obtain advice with respect to any particular issue or problem. Read more about our limitation of liability here.