Policyholders may look back on 2023 and remember the trend of premium increases. However, new technologies such as artificial intelligence (AI) are reducing costs for underwriters, which will translate to more competitive customer rates.
You can expect the remainder of 2024 to bring continued technological improvements powered by AI. Policyholders can insure more assets in less time, while carriers continue to reap the cost benefits of greater efficiencies. Of course, when it comes to emerging tech like AI, it's not all good news. New technologies can be used to cheat the system as well as benefit underwriters and policyholders.
When we take a closer look at AI applications in the insurance industry, here are five trends we anticipate seeing in the months ahead:
Insurance On-Demand
Are you renting out your vacation home, trailer or snowmobile? Consumers can monetize their assets through rental companies and online brokers. If you plan to rent your assets, particularly for short-term use, insurance is necessary and can't be left to the renter's discretion
You must be sure that your assets are adequately covered and that you are protected from personal liability. Thankfully, with on-demand policies, getting the necessary coverage becomes simple, whether you are a renter who requires a policy or an owner looking to guard against liability. With the help of AI risk assessment, your policy is ready in minutes and can be customized to your specific needs.
See also: 5 Ways Generative AI Will Transform Claims
Embedded Insurance Everywhere
Sure, you may know how to add insurance for your purchases or services, but why not sign up at the point of sale and make it all a simple transaction? After all, who wants to wait and go through yet another transaction to add insurance? This process isn't a new strategy. For example, travel insurance is often offered with a plane ticket.
What's new is that embedded insurance is being extended to other purchases, whether it's concert tickets, a new e-bike, ride-sharing or online banking. Embedded insurance reduces risk for consumers and avoids their having to shop for coverage. Just sign on the dotted line to include insurance with your purchase, and, who knows, the merchants may give you a special deal you can't find elsewhere. Embedded insurance presents an opportunity for insurers to capture new customers before they have a chance to shop for coverage.
More Benefits From Generative AI
Would you buy insurance from an AI bot? Perhaps you already have. AI-powered automation cannot replace the human touch entirely, but sometimes underwriting can be very transactional, and generative AI can make that process much faster and smoother.
There are several ways generative AI will benefit underwriters and policyholders:
- Personalized insurance - Generative AI can analyze vast amounts of data, including local news and statistics, social media, IoT devices and historical claims, which makes it easier to create custom risk profiles for personalized policies at more accurate prices.
- Underwriting - The same generative AI technology can be used for underwriting, making it easier to analyze nontraditional data points.
- Claims processing - While some larger, more complex claims require careful human scrutiny, others are just business as usual, and who doesn't like business to be faster and more efficient?
- Customer service - More companies are using chatbots and virtual assistants powered by generative AI to provide information on policies, claim, and more.
- Marketing and sales - Generative AI also plays an increasingly large role in marketing content and sales strategies.
See also: Balancing AI and the Future of Insurance
More Platforms to Protect From Generative AI Fraud
AI isn't only about improving speed and efficiency. Fraudsters see generative AI as a new tool to falsify and exaggerate real claims and defraud insurers. But similar technology being used by fraudsters can be applied to protect insurance companies and their customers.
Here are just some of the ways that AI is being used to turn the tables on cyber criminals:
- Anomaly detection - AI models trained to identify normal transaction patterns and claims data can identify outliers and anomalies that could point to fraud, flagging them for investigation.
- Behavior analysis - Using AI to analyze behavior patterns associated with fraud helps identify potential fraudsters with greater accuracy.
- Synthetic data - Synthesizing data that mimics fraudulent behavior can help train fraud detection models to make them more accurate and effective.
- Predictive modeling - AI can analyze historical data such as trends, patterns and past claims to predict fraudulent activities.
- Document and image analysis - AI is an ideal tool for detecting phony images and forgeries, detecting alterations and inconsistencies. For example, generative AI can compare images submitted for claims with similar images or analyze the image to detect digital alterations.
- Text analysis and NLP - Using natural language processing (NLP), generative AI can provide investigators with fraud indicators and suggest areas that need further investigation, making the review process more efficient.
- Continuous learning - As the fraudsters become more sophisticated, so do the fraud detection tools. Generative AI learns and adapts as it encounters new forms of fraud, adjusting fraud detection models accordingly.
Demand for More Cyber Insurance
Now that the bad guys are getting smarter about using AI, there are more cyber threats to worry about. It's time to batten down the hatches because, in addition to fraudulent claims, hackers are using AI to access critical systems, release malware and launch more elaborate phishing schemes. While steps can be taken to protect and guard against these threats, ultimately, insurance is the backstop to protect against losses. As the landscape for cyber-threats broadens, it's only natural for companies to cast a wider net to protect their businesses and reputations.
These are just some of the trends AI will shape in the insurance industry. Companies that embrace AI-based insurance will be able to develop innovative products for policyholders. Underwriters can also use AI to improve efficiencies and reduce costs. At the same time, generative AI can pose new threats to insurance underwriters.
Those insurance companies positioning themselves to thrive are finding new ways to apply AI to improve operations, develop innovative products and protect themselves from AI-generated fraud and cyber threats.
