The information revolution has had an undeniable impact on society, as did the industrial revolution before it. Now artificial intelligence is poised to be the next revolution that will have an immense impact on our society from our personal lives to the way in which we transact business.
Artificial intelligence, or AI, has been around since the mid-1950s, but most recently it has been developing at an extremely rapid pace. Since 2016, the demand for AI related products, both hardware and software, has exploded.
AI will undoubtedly continue to impact all business sectors, including the insurance business, which stands to incur a significant disruption. With the rapid pace at which it is developing, AI may soon be heavily used in all aspects of the insurance industry, including sales, customer service, underwriting, claims assessment and fraud detection and prevention.
AI has and will continue to be used in the area of insurance marketing. AI can use customer data to accurately target clients with products that more closely align with their needs and preferences. Further, chatbots will allow customers to procure insurance and access customer service through the convenience of electronic devices, anywhere, anytime.
Machine learning algorithms are currently impacting how insurance underwriters assess risk. Risk appraisals are increasingly becoming the realm of cognitive computing. In general, the term cognitive computing has been used to refer to new hardware and/or software that mimics the functioning of the human brain and helps to improve human decision-making. This has resulted in faster, more accurate and less expensive risk assessment.
Cognitive machine learning algorithms have also proven of great use in fraud detection. AI can assess claims more accurately and at a much faster pace than humans, who are susceptible to fatigue and error. Machine learning algorithms can quickly process valid claims and flag suspicious claims for investigation. This results in a tremendous savings for insurers who annually lose billions of dollars due to fraudulent claims.
Insurance is an extremely competitive industry, and therefore it is not surprising that insurers are investing substantial sums in AI endeavoring to secure more of the market share by: better understanding client needs and preferences; making the process of obtaining insurance easier; more accurately and efficiently assessing risk; and more accurately and quickly assessing claims and detecting fraud.
With rapid advancements in AI technology, the insurance industry, which has long been resistant to change, will undergo a significant disruption in the way its business is transacted, resulting in a competitive advantage for those companies that embrace all that AI has to offer.