In the insurance industry, we’ve got people in both extremes. Those who believe Artificial Intelligence (AI) is a magical entity that can do anything. And those who’ve been sceptical about AI since the days of The Terminator.
The reality lies somewhere between. The global AI in insurance is estimated at $8.13 billion in 2024. It’s predicted to reach $141.44 billion by 2034. The AI transformation is already underway, and now’s a critical time for businesses to adapt.
At the same time, simply jumping onto the hype train without having a clear idea of what AI can achieve.
In this blog, you’ll get a realistic overview of how AI in insurance can be beneficial.
Challenges in the Insurance Industry AI Can Solve
The insurance industry is not free from challenges. NavAI will tell you 10 insurance business problems you can “realistically” solve right now using AI. Let’s dive into the impact of AI on insurance!
1: Customer Churn
Was my love not enough?
It’s usually too late. The better question to ask is: When will my love stop being enough?
Customers leave for all kinds of reasons. What if you could see it coming? AI can.
AI in insurance can tell you precisely which customer will leave and why before they start packing their bags. It can analyze customer data and identify early signs of churn. Once you know that, you’ve got plenty of time to reach out and make things right.
And how should you reach out? AI’s got that covered too. It’ll give a personalized approach and pitch that’s sure to keep the customer interested.
2: Climate Variations and Calamities
“I’m not afraid of heights, I’m afraid of falling.”
AI can warn you of the cliff before you fall.
The insurance claims rise with the rising sea levels. Catastrophic events can make your business a sitting duck.
Some effects can be subtle, such as the degrading health of consumers. This makes it difficult to track and take preventive measures.
First, AI in insurance can help you identify these risks. It can analyze climate data and identify vulnerable areas.
Moreover, it can develop risk management strategies, adjust underwriting policies, and adapt pricing.
3: Low Conversion Rate
Are you interested in GAP insurance?”
How many times have you hung up the phone after hearing that? It has become a part and parcel of the insurance sales game. But it doesn’t have to be this way.
In most cases, it’s not the pitch; it’s the product. The thing with GAP insurance is that most people don’t get it.
What if you could know exactly what insurance the person wants? That’s exactly what AI can tell you.
AI can analyze customer profiles and past behavior to predict exactly what the customer will want next. You can pitch the exact policy the prospect wants, thus increasing your conversion rate.
4: Changing Customer Expectations
Don’t go changing, trying to please anybody!
Customers are like the weather. They’re always changing, and you’ve got to be prepared for surprises. What’s worse than forgetting your umbrella?
AI in insurance can help you stay ahead of the curve. It uses data such as customer feedback, social media trends, and market scenarios to understand how customer expectations are evolving and provide you with a weather forecast.
You’ll know exactly how to adapt your insurance offerings and marketing strategies.
5: Wrong Premiums
“I’m not paying for that!”
It’s a 30/60 loss ratio if you undercharge or overcharge your premiums. Pricing is all about balance. Tilt, and you’ll either lose customers or profits.
This is where AI in insurance comes into play. It can scrutinize vast amounts of data to identify patterns in customer behavior, claims, and risk factors. Based on this, it can calculate the optimal premiums in different segments.
You can ensure that customers are paying the right amount for the coverage they need; a true win-win situation.
Also Read: Top Business Questions Data Can Answer
6: Incorrect Budgeting
“One size does not fit all.”
Said over a million times but needs to be said again, especially in insurance. Customers are left feeling overcharged or underinsured.
AI in insurance has a trick up its sleeve: Dynamic Pricing.
You can adjust product prices in real-time based on market conditions, customer behavior, and risk factors.
That’s not all. AI can forecast sales and tell you which products will skyrocket and point out the duds. Based on this, you can allocate a budget to the products that are most likely to sell well.
7: Market Uncertainty
“The only constant is change.”
In the 90s and early 2000s, people had no idea what AI was. Films like Blade Runner and The Matrix tried to actualize perceptions and predictions of AI. The true potential of AI wasn’t realized until decades later. And it disrupted the market within months.
Don’t let such disruptions cost you in the future. Now’s the time to use AI in insurance and steady your ship in the market typhoon.
AI can forecast which policies are likely to yield maximum profits many years down the line and which ones need adjustments. You’ll know precisely where to allocate resources and develop contingency plans to protect your business.
8: Regulatory Compliance
State and national regulations can vary across territories, making it difficult to track all of them. Failing to meet those guidelines risks getting a fine slapped or, even worse, getting your license snatched.
AI in insurance can continuously scan regulatory changes and updates. If it sniffs any trouble, it boops you immediately to any new requirements or modifications that may impact your business.
AI helps automate the generation of compliance reports, ensuring accuracy and timely submission.
By analyzing vast amounts of data, AI can identify potential compliance risks and prioritize areas that require immediate attention.
9: Cybersecurity Threats
Cybercriminals are always eyeing the insurance industry due to the ton of sensitive information it has access to. With the advancements in technology, cyberattacks have become so powerful and fast that it’s nearly impossible to stop them manually.
Modern problems require modern solutions. Only AI algorithms are capable of tackling the inhuman speed of cyber attacks. They actively track traffic in real time and identify unusual patterns that may indicate a cyberattack.
Once these threats are detected, AI automatically retaliates by blocking malicious IP addresses or shutting down compromised systems. It can analyze claims data to identify patterns of fraudulent behavior and flag suspicious activities.
AI can identify and block phishing emails, which are a common method used by cybercriminals to gain access to sensitive information.
10: Operational Inefficiencies
Be it insurance companies or others, operational inefficiencies are omnipresent. Integrating AI in insurance streamlines these processes and improves overall efficiency.
AI automates repetitive tasks such as data entry, policy processing, and claims processing. Intelligent document processing automatically extracts information from documents like claims forms, invoices, and contracts, reducing processing time and errors.
Virtual assistants can provide 24/7 customer support and guide customers through their investing journeys.
Got Any of These Problems? We Have the AI!
Implementing AI in your insurance business is easier than you think. NavAI can take the load off your shoulders. Our AI data analytics and forecasting tool can solve all of the above-mentioned problems while you sit back and relax.
NavAI has a user-friendly and interactive interface. Just ask in plain English, and you’ll get proactive insights and business forecasts.
For instance, one of our clients, a South American retailer, increased its top line by leveraging NavAI’s customer segmentation. Knowing exactly whom to sell what, when, and where can do wonders. NavAI tells you just that.
Let’s discuss how NavAI can give you the necessary competitive edge.
Visit our website for more info and live demos, and to contact our AI experts.
FAQs:
1: How can AI help reduce customer churn?
AI analyzes customer data to identify patterns and predict which customers are likely to churn. By proactively addressing their needs and offering personalized solutions, insurers can reduce customer attrition.
2: How can AI improve the accuracy of insurance premiums?
AI takes into account a wide range of factors, such as demographics, driving behavior, and property characteristics, to calculate more personalized insurance premiums. This can help insurers avoid underpricing or overpricing risks.
3: Can AI accurately predict climate-related risks?
AI can analyze vast amounts of climate data to identify trends and patterns, allowing insurers to better manage risks. However, it’s important to note that climate modeling is complex, and AI should be used in conjunction with expert judgment.
4: Is it safe to use artificial intelligence in the insurance industry?
While there are concerns about AI’s potential impact on jobs and privacy, it is generally safe to use when implemented responsibly. Insurance companies should prioritize data security when adopting AI technologies.
