The robots are coming: how AI is taking over insurance

In the old days anyone unfortunate enough to have a bump in their car soon found that the process of claiming on the insurance was almost as painful as the crash itself. Registering the claim, then waiting for an assessor to come out to look at the damage and then haggling about the value before final settlement all took many weeks. Today, the whole process can be completed using modern technology and artificial intelligence in a fraction of the time and cost - and often with a better outcome for all concerned. This is true not just for auto claims, but for a wide range of insurance processes and categories. (Home, travel, personal injury etc.)

There are millions of insurance policies taken out each year, and many consequent claims. Most are straightforward, yet insurers have processed them in a labour-intensive way. Streamlining the data flows lets them automate these processes. Bots gather the data at the start of the process and put it on a central server, where AI models verify and classify it and determine next steps, including whether to flag fraud. Machine learning also lets the technology make better, more informed decisions over time, improving as it goes and shortening the claims lifecycle.

Facial recognition and damage assessment

Digital photography and video streaming on mobile phones mean site visits are needed much less. Standardising the data required lets policyholders provide much of the information themselves. Machine learning models can process the images, classify the damage and verify identity in the same step. AI can then look at the images and recommend whether to repair the part, replace it, or write it off as beyond economic repair.

Using sentiment analysis, AI can also make assumptions about a policyholder’s emotions. The technology can ‘listen’ for tone of voice and estimate whether the policyholder is telling the truth, useful in fraud detection. AI already spots fake documents and doctored IDs to a higher standard than people do, and machine learning keeps improving that over time.

Data driven learning

Whether for health or home insurance, or anything in between, the data insurers build up over time lets AI use what happened in the past to inform present policies and claims, and make accurate assessments. The more data, the better AI performs. For machines and vehicles, onboard telematics that record how they have been operated, and therefore consumer behaviour, produce a vast amount of data AI can use to determine how a claim should be processed. And unlike humans, AI doesn’t get tired, have off-days, feel sorry for people, or like or dislike them - it does the job without any of that.

The move to digital

This move to online policy and claims handling was underway already, but Covid-19 accelerated the transition: insurers handled almost all claims online during the depths of the pandemic. That forced a standardisation of the information gathered, data that cloud-based AI technology can then interpret.

Despite AI’s potential, it probably won’t fully replace the human side of insurance. But as AI keeps improving, it’s not hard to imagine a time when you can’t tell whether you’re talking to a human or a computer. It’s the stuff of science fiction.

The insurance industry is waking up to AI’s potential to revolutionise policy and claims processing. It can lower overall indemnity costs, make better decisions over time and resolve claims far faster. Insurers can’t afford to ignore those benefits. AI will soon move from a source of competitive advantage to a basic requirement for survival.