How AI is Transforming the Insurance Industry
According to the International Data Corporation’s recent report, spending on artificial intelligence (AI) systems will reach $97.9 billion in 2023, with a 28.4% compound annual growth rate from 2018-2023. Insurance, in particular, is trending towards the aggressive adoption of AI, and more specifically, machine learning (ML) powered solutions. The National Association of Insurance Commissioners reported in March 2020 that the use of AI by insurers has grown exponentially over the past few years and that “the acceleration in AI is being driven by exceptional technological advances along with a major shift in customer expectations.”
An increasing reliance on the use of AI by the insurance industry has raised consumers’ expectations for more personalized, cost-effective, and agile insurance offerings and rate delivery. How can this type of delivery be achieved?
By integrating advanced analytics systems into business operations, insurance companies can offer more personalized product bundles in real-time. AI makes that possible. To capitalize on the power that AI can bring to their business, insurers must first assess how to best leverage those capabilities with their existing systems, determine what solution works best for them, and make the solution an integral component of end-to-end automated rate and product delivery.
Maximizing the Value of AI
Insurance companies need to first understand what they want to achieve with AI and identify challenges that can be remediated through its use. They also need to assess their readiness and capacity to adopt and operationalize an AI-powered solution and identify how to incorporate an automated, analytics-driven system. When determining how AI should be used within insurance operations, all business lines and teams should be considered.
Breaking down communication silos will ensure that AI can be effectively integrated into performance measurements, market monitoring, operational efficiency, and pricing strategies. Moreover, seamless integration with existing IT systems is key for AI solutions to deliver value fast. Insurers should engage AI solutions that are compatible with proven traditional methodologies to fully maximize their existing software resources with new AI capabilities.
Aligning End-to-End AI Solutions With Business Objectives
There are three primary considerations when selecting AI for insurance: end-to-end rating systemization, advanced personalization capabilities, and an iterative deployment that does not interrupt or delay business operations. AI has the power to facilitate the creation of smarter and more personalized product offerings and deploy rates tailored to consumers’ financial circumstances and preferences. Insurers can maximize the value of AI by deploying systems that engage predictive models and smart automation to run “what-if” simulations of various decisions around products, rates, business KPIs, and more.
Most insurers are more prepared to embrace AI than they realize. However, it is critical to select the right system that can adapt to market conditions and provide consumers with personalized product bundles in real-time. Given a smooth integration with legacy IT systems and the right automated end-to-end system, insurers can leverage AI to offer smarter rates immediately. Additionally, insurers should consider machine learning capabilities that provide them with full governance and compliance across different analytical models. The business and consumer benefits are unparalleled, as insurers can effectively react to competitors, market dynamics, and consumers’ needs in real-time.
Deploying AI: Turning Strategy Into Practice
AI solutions should be deployed as a critical component of strategic decision making, operations, and pricing strategies, as opposed to being treated as an add-on. Adopting and deploying AI to simply check a box is unlikely to generate business benefits or build a stronger customer base. The ability to operationalize AI is challenging, but critical to meeting consumer’s real-time needs. Once operationalized, insurers will be rewarded with higher customer retention rates and greater trust.
AI has redefined how the insurance industry functions and will soon be a requirement in keeping pace with the market, competitors, and consumers. Consumers are seeking insurance products and rates that are attuned to their immediate personal needs and address their current financial situations. Insurers must have the ability to drive smarter analytical solutions to the market in a way that propels business velocity – the ability to systemize, automate, and accelerate the deployment of rates across the enterprise.
It is imperative that insurance companies proactively harness the power of AI solutions to better meet their customers’ needs and stay competitive in a rapidly changing industry.