Insurtech Concepts: The Use of Artificial Intelligence and Robotics

What is AI and what does it do? Encyclopedia Britannica describes “artificial intelligence” as “computer systems endowed with intellectual processes characteristic of humans, such as the ability to reason, discover meaning, generalize, or learn from past experience.” http://www.britannica.com. Although the general use of these computerized systems has increased exponentially in recent years, the impact on the insurance market has been particularly swift and substantial. AI is transforming multiple sectors of the insurance industry, including underwriting, claims, customer service, and marketing. AI is also expected to revolutionize more specialized insurance functions, such as fraud prevention, anti-money laundering, and pricing—all of which ultimately will benefit not only insurers and other insurance-related companies but also policyholders.

Several factors contributed to the accelerated use of AI in insurance, such as higher computing power and more available data. Also of impact was the global connectivity that exists today, which enables machines to run complex algorithms faster than humans and handle significantly more input data than that of which a person is capable. The increasing usage is evolving customers’ expectations for insurance, although traditional insurers, more than insurtech start-up companies, surely will face challenges integrating AI into some of their existing technologies due to issues such as data quality, privacy, and infrastructure compatibility.

The expansion of AI in insurance is seen through the industry’s adoption of robotics, including drones. Insurers employ robotics process automation (RPA) to handle high-volume and complex data actions with speed. RPA uses software robots or virtual workers to perform discrete activities and tasks similar to what a human would perform. RPA also frequently works in concert with other systems, such as transaction processing, data manipulation, and communication. A concrete example of RFA in action in the insurance sector is the usage of virtual assistants or “chatbots” to improve customer service. A chatbot is essentially a digital service capable of holding natural-sounding conversions with individuals to accomplish a particular task, such as answering consumers’ questions, giving advice, checking billing information, and addressing common inquiries and transactions. As early as 2016, well-known insurtech Lemonade reportedly utilized a chatbot named “Jim” to settle a claim in three seconds. More than simply an overhauler of administrative tasks, RFA creates capacity and expands possibilities in risk management and insurance. At the forefront of RFA’s impact on insurance is claims processing, although that is certainly not the end.

Insurance executives are confident that AI will be regularly working alongside human workers in other aspects as well. AI, and in particular, RFA, can and will do more than simply replace human resources though. It will enable new possibilities for parties in the insurance realm, including insurers, their employees, other companies in the insurance industry, and, of course, policyholders.