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How AI Is Helping the Insurance Industry

Artificial Intelligence in Insurance AI in the insurance industry

The insurance industry is seeing a welcome disruption via artificial intelligence (AI), but only a few companies might benefit from this breakthrough. Most organizations lack cognitive technologies to process insight, and this makes the data almost useless.

But insurtech companies can connect the potential of the AI data streams available. In this complete introduction to artificial intelligence, you’ll be learning:

  • Characteristics of artificial intelligence (AI)
  • How AI works
  • Recent AI trends
  • AI applications in the insurance and insurtech industry
  • Future of AI in the insurance industry

And although artificial intelligence is massively popular, other complex tech topics like big data and deep learning can often cause confusion.

So if you want to leverage AI and get the best out of this breakthrough, this article is for you. Let’s jump right in.

What is Artificial Intelligence (AI)?

John McCarthy coined artificial intelligence in 1956, defining it as “the science and engineering of making intelligent machines, especially intelligent computer programs.” 

In other words, artificial intelligence is the simulation of human intelligence in machines that are programmed to think like humans and mimic their actions.

The concept combines different disciplines: computer science, philosophy, psychology, math, sociology, biology, and neuron science. On average, one or more of these areas contribute to building an intelligent system that can reason, learn, and solve problems—which is the major foundation of AI. 

What is the History of Artificial Intelligence?

Believe it or not, the idea of having intelligent machines could go as far back as ancient Greece through the tale of Talos by Hesoid.

Hesiod describes Talso as a giant bronze robot that would protect the island of Crete from invaders. And in another ancient Greek myth, Hesiod describes Pandora as an artificial woman who was sent to Earth to punish humans for discovering fire.

But modern artificial intelligence was truly conceptualized through several historic milestones. Here are just a few examples.

  • 1943: A paper by Walter Pitts and Warren McCullough first recorded the proposal to use a mathematical model to build a computer system that modeled the human brain and nervous system.
  • 1952: Arthur Samuel develops the first checkers playing program where the computer would “self-learn” how to play against an opponent.
  • 1958: John McCarthy develops LISP, a computer programming language which was used in AI research.
  • 1961: The first industrial robot begins working on an assembly line at a General Motors plant in New Jersey.
  • 1972: A system that uses artificial intelligence to identify bacteria-causing infections and recommended antibiotics is developed at Stanford University.
  • 1986: The first driverless car is built in Munich. The Mercedes-Benz van was equipped with cameras and sensors as well.
  • 1998: Furby, the first domestic pet robot, is created.
  • 2008: Google introduces the speech recognition (voice-enabled) feature on the iPhone.
  • 2014: Google launches the first self-driving car to take a state driving test.

What Are the Characteristics Of Artificial Intelligence?

Artificial intelligence has 5 major characteristics:

  1. Learning
  2. Perception
  3. Reasoning
  4. Language understanding
  5. Problem solving

These five characteristics are also some of the features of a rational thinking person. This in mind, we can say that artificial intelligence:

  • Thinks humanly
  • Thinks rationally
  • Acts humanly, and
  • Acts rationally

What Are Examples of Artificial Intelligence?

Artificial intelligence plays out on a daily basis. Here are some examples.

  • Intelligent robots that can perform several tasks. As an example, Hanson Robotics created Sophia, an advanced social-learning robot that can communicate with natural language and convey facial expressions that mimic human emotions. 
  • Natural language processing that allows us to interact with our computers like Siri, Alexa, and Google Assistant.
  • Speech recognition systems that allow machines to decode our statements. These systems even handle slang words, different accents, and change in voice.
  • Gaming that allows the computer to be your opponent via AI. Think of strategic games such as tic-tac-toe, poker, and chess. 
  • Vision Systems that use visual inputs to analyze and generate results. Examples include face recognition systems and clinical machines that diagnose patients. 
  • Handwriting recognition that easily recognizes, reads, and converts handwriting into editable text.

Other examples of AI include email virus and spam filters, real-time recommendations on Netflix, social media monitoring tools for harmful, dangerous, or adult content, and smart assistants like Alexa or Siri.

How Does Artificial Intelligence Work?

Artificial Intelligence Infographic by: Visual Capitalist

AI falls under two broad categories:

  1. Narrow Artificial Intelligence (also known as “weak AI”)
  2. Artificial General Intelligence (also known as “strong AI”)

#1. Narrow Artificial Intelligence

Narrow AI performs a specific task with precision while mimicking human intelligence. But it operates in a limited way (hence “weak AI”).

Examples of significant narrow artificial intelligence breakthroughs include:

  • Google search
  • Self-driving cars
  • Alexa, Siri, and other personal assistants
  • Image recognition software

#2. Artificial General Intelligence (AGI)

Strong AI is more adaptable and flexible than narrow AI. It acts independently with full cognitive abilities.

AGI can reason intelligently based on accumulated previous experiences as well as learn how to perform a variety of tasks. This includes advanced-social learning robots that interact with users using accumulated personal information.

Though AGI actually doesn’t exist quite yet, the concept is demonstrated in movies like The Terminator or Star Trek. 

And as exciting as it sounds, scientists are yet to use it practically.

What Are Some Recent AI Trends?

#1. Voice Recognition and Natural Language Processing

This development is one of the latest trends in the AI space — with companies like Apple, Microsoft, Amazon, and Google leading the way.

These tech-progressive companies have come up with amazingly intelligent virtual-assistants that rely heavily on natural-language processing and voice recognition to operate. 

Examples include Siri, Alexa, Cortana, and Google Assistant.

#2. Visual Systems

Visual systems mark a big milestone in artificial intelligence technologies. 

Computer-controlled devices can now accurately detect, analyze, and produce results all from a simple visual input. For instance, medical devices can quickly diagnose and detect abnormalities through body scans.

And in China, YITU Technology’s facial recognition system can identify a face from a database of 2 billion faces in seconds with 95.5% accuracy.

#3. Use of Artificial Intelligence In Healthcare

The use of AI within health insurance and the medical field has recently gained momentum as a rising healthcare technology trend.

As one example, Google and Amazon funded the development of Aiva – a virtual health assistant that helps medical professionals and patients alike. For example, Aiva can retrieve medical records, check on prescriptions, or help with administrative tasks.

AI’s predictive analytics algorithm can also scan through hospitalization data and claims to provide benefits to customers. 

AI in Insurance: How Is AI Being Used In The Insurance & Insurtech Industry?

#1. Automated Insurance Claims Management Process

The claims management process can be somewhat challenging and cumbersome with the amount of paperwork, manual input, estimation, and more. 

And without this process, we cannot confirm insurance claims and check fraud, which has cost the insurance industry over $40 billion in losses each year.

Cue AI as a potential solution. AI gives us access to relevant insight and information to make the insurance claims management process more efficient and accurate.

For example, Lemonade, Inc. claims their AI handles over 30% of their claims within 3 seconds. Through AI, the company runs dozens of anti-fraud algorithms and to verify claims instantly or send it to their human support team.

Other companies are also reporting improved processes in less time.

Sure, you can check and confirm claims manually, but the AI algorithm is how you do it accurately and faster.

#2. Interactive Chatbots

AI-powered chatbots are replacing human assistants to provide fast and efficient customer service. In general, chatbots have helped to resolve claims, provide information and answer simple questions. 

Chatbots use regular messaging apps for a fast yet personalized customer experience. AI chatbots can also use sentiment analysis and natural language processing to communicate with customers. 

In the insurtech industry, Insurify – an online car insurance platform – created a chatbot to help consumers find and buy car insurance directly from Facebook messenger. 

Another chatbot example is Progressive Insurance’s Flo, which can help customers file claims and manage their payment dates.

Beyond helping consumers, AI also works to support insurance agents. Allstate’s “ABle” helps insurance agents to sell commercial insurance products. 

Artificial Intelligence in Insurance: AI Benefits to the Insurance/Insurtech Industry 

These are several ways insurance companies are benefiting from AI:

  • Automated claims support, for faster and higher quality output.
  • Predictive analytics, which provides more proactive measures.
  • Visual analytics in settling claims by capturing and categorizing data in pictures and videos.
  • Better customer experience with intelligent chatbot for support and lead generation.
  • Interactive bots, which can quickly address customers’ queries through texts or voice.

What Does the Future of AI in The Insurance Industry Look Like? 

AI is already improving the insurance and insurtech industries in many ways. And we expect it to continually grow and evolve from here.

Here are 4 predictions about the future of artificial intelligence in insurance.

#1. Faster, More Customized Claims Settlement 

Automated claim processes will allow insurance industries pay insurance claims faster, save on costs and identify fraud quickly and efficiently. 

#2. Predictive Analytics

The insurance sector thrives on predicting and forecasting risks. And with AI, it’ll be easier for insurance companies to tailor relevant products to match a customer’s individual needs.

Lemonade, Inc. has developed a sophisticated AI system, Maya, which can recommend products and craft personalized policies in seconds.

For many years, insurance companies based their coverage on risk pools and groups. But AI is giving them the power to glean insights from huge data sets in real time to predict health outcomes for a single consumer.

Also, AI may analyze data more efficiently than a human to accurately predict customers’ risk. 

#3. eCommerce

Insurance companies can leverage AI in insurance to attract more customers.

Benefytt’s direct-to-consumer site healthinsurance.com is one example. Through healthinsurance.com, customers can use self-guided navigation tools to get personalized quotes for private insurance products and Medicare Advantage plans.

#4. Big Data

An overwhelming amount of data is created on a daily basis – and this rings especially true within the insurance industry. 

Several insurance companies are successfully leveraging big data to predict risk, detect fraud, and create customized packages for customers.

Companies like State Farm offer “Drive Safe & Save” programs to offer discounts to customers who share their driving habits and data. Insights like these can help insurance carriers to continually develop customized products.

Check out our article to learn more about how big data is revolutionizing the insurance industry.

Conclusion

Artificial Intelligence is disrupting the insurance/insurtech industry in a positive way.

Things like chatbots, automations and predictive analytics will give consumers a smoother insurance experience, while insurance companies enjoy the benefits of saving money and offering a more personalized customer experience.

The truth is: Every insurance company wants faster results while delivering exceptional customer experiences. But we’ve barely scratched the surface of the potential of AI – the best is yet to come.