How AI is Changing Insurance: 8 Powerful AI Applications for Insurers

The insurance industry might not be the most thrilling, but with digital tech advancing, something interesting is happening.

As smaller insurance companies try to adapt, AI is proving to be a powerful tool to streamline operations, reduce costs, and improve customer experiences in ways that were hard to imagine a few years ago. From automating routine tasks to offering insights for more personalized services, AI is helping these companies stay competitive and relevant in a fast-changing market.

Let’s dive in to see how AI is transforming the insurance industry and explore some practical ways to utilize its potential.

The AI Shift in Insurance: A Big-Picture View

AI and automation are changing the way insurers do business, offering new possibilities and efficiencies.

According to McKinsey, AI could add up to $1.3 trillion in value to the global insurance sector by 2030. With generative AI, which started gaining traction in late 2022, McKinsey suggests this could have an economic impact of $4.4 trillion across the world economy—highlighting the powerful role of AI.

For small and medium-sized insurance businesses (SMBs), adopting AI is becoming essential to staying competitive. Imagine updating traditional processes like underwriting, claims management, and customer service to make them quicker and more seamless.

With AI integration, insurers can revamp their workflows, offering a blend of efficiency and a more personal touch. In many ways, it’s like giving the business a fresh, modern update.

Key Areas Where AI is Redefining the Insurance Sector

Underwriting: Faster, Smarter Decision-Making

Underwriting used to be a lengthy process, but AI is speeding things up significantly.

Small and medium-sized insurers (SMBs) can now use AI tools to greatly enhance the speed of underwriting. Many companies have seen processing times shrink from days to just seconds or minutes, with only about 5% of applications requiring human review.—a real game changer.

How does it work? Underwriting involves analyzing unstructured data from various documents to create clear, actionable insights. AI automations can create a detailed risk profile in minutes by gathering data from sources like social media, bank statements, and driving records.

Once a risk profile is generated, AI can reference internal guidelines and similar cases to set personalized pricing, making it feel customized for each client. And thanks to transparency, customers can see how their data influences their estimated price, enhancing trust and satisfaction.

With this thorough client profile, the system can confidently make application decisions. If the AI can’t make a call, a human expert steps in to review manually.

McKinsey cites John Hancock’s eApp platform, which provides a fully digital application experience with instant decisions for certain applicants under 60, with policies up to $3 million. Companies using this approach have seen a 14% increase in sales over two years—a win-win for both insurers and customers.

Streamlining Claims Processing: Efficiency Meets Accuracy

If you’ve ever filed a claim, you know that the wait can be frustrating. AI, however, is changing that experience for the better.

Using computer vision, AI can now assess damage to vehicles, estimate severity, and create a detailed report of damages and any necessary legal documentation. If the system spots inconsistencies in the claim data, it can raise a dispute and initiate follow-up actions. In cases of suspected fraud, it can even deny claims and flag suspicious clients, providing a strong line of defense against fraud.

Companies like Tractable, Lemonade, and Visana are embracing AI in claims processing. They’ve reported that many claims are now processed without human involvement, which speeds up service and keeps disputes low.

The result? Smoother, faster claims handling and happier customers. AI is proving to be a powerful tool for making the claims process more efficient and accurate.

Predictive Analytics for Proactive Risk Management

Think of AI-powered predictive analytics as a crystal ball for insurance.

This technology helps small and medium-sized insurers manage risks by adjusting pricing and policy structures based on predictions. It benefits clients too by identifying potential risks early and offering incentives for preventative actions that reduce possible damages.

Predictive analytics relies on large amounts of data from various sources—just the kind of environment where AI excels. For SMBs with limited data, traditional machine learning (ML) may be a better fit, similar to how ML is used in finance to forecast stock prices. ML methods have often outperformed older statistical approaches, although those still have a role in the industry.

By using predictive analytics, insurers can be proactive, safeguarding both their profits and their clients’ well-being.

Enhancing Fraud Detection Capabilities

Fraudulent claims in the U.S. add up to over $80 billion, with honest customers ultimately paying higher premiums to cover these losses.

Let’s not kid ourselves—fraud is a growing concern in the digital age—and traditional methods struggle to keep up with increasingly sophisticated schemes.

That’s where AI-powered fraud detection comes in. These systems sift through massive amounts of data to spot unusual patterns, flagging anomalies faster than you can say “fraud alert!”

By concentrating on genuine claims, insurers can maintain customer trust and efficiently identify potential fraud. With accuracy rates above 90%, AI has become a trusted partner in the fight against insurance fraud.

Automated Policy Management

Imagine a small auto insurance company using AI to adjust policies based on seasonal vehicle usage, such as activating or deactivating coverage for winter cars or motorcycles. This approach reduces manual work and ensures customers receive consistent service year-round.

Now, let’s talk about adding value for clients.

For example, AXA’s “Pill Pay” program encourages high-risk clients with chronic conditions to upload videos of themselves taking their medication on time. This innovative strategy not only helps the insurer prevent fraud but also rewards clients who adhere to their health routines.

In short, automated policy management goes beyond simply cutting costs; it enhances the overall experience for both insurers and customers.

AI in Customer Insights

Imagine an insurance company that offers both auto and home insurance. By analyzing a customer's search and purchase history, AI can uncover valuable insights.

For example, if someone is actively looking for car insurance, it likely means they're planning to buy a new vehicle. The insurer can then suggest insurance packages that fit that upcoming purchase.

But there’s even more!

AI tools can also pinpoint high-value customers who may want additional coverage. By examining previous interactions, insurers can offer personalized discounts and competitive deals that truly meet their needs.

Using AI for customer insights not only tailors offerings but also reveals trends in customer behavior. This knowledge can drive the creation of new products or services that target emerging markets.

So, while AI crunches the numbers, insurers can focus on what truly matters: building lasting relationships with their clients.

Personalized Insurance Products

AI is transforming how insurance companies develop personalized products.

By examining a customer’s existing policies, claims history, and unique factors—such as interests and lifestyle choices—AI can create customized insurance reports.

For instance, in life insurance, AI tools can take into account health metrics and family history to produce clear risk profiles. This enables insurers to recommend tailored packages that fit each individual’s specific needs.

Additionally, AI can customize these reports based on customer preferences. Some clients may prefer a straightforward summary, while others might appreciate a more detailed analysis.

Many small and medium-sized insurers often struggle to provide this level of personalization due to limited resources. However, with AI, creating personalized reports becomes both cost-effective and scalable, no matter the size of the customer base.

A key benefit for customers is that AI can highlight potential risks, such as changes in health history, encouraging them to adjust their coverage. This improves safety and lowers out-of-pocket costs when claims are filed.

With AI at the helm, insurance becomes more personalized, efficient, and customer-friendly.

Enhancing Customer Engagement

In the bustling world of insurance, customer engagement can make or break a business.

Companies like GEICO and Zilveren Kruis, are taking engagement to the next level, hosting virtual happy hours powered by AI chatbots. These relentless digital assistants provide 24/7 support, responding to inquiries faster than you can say “premium.”

Need help with a claim at 2 AM? No worries—your AI companion is always on standby.

Let’s add a fun twist to customer outreach. Instead of sending bland emails to lapsed customers, how about a playful message? Something like,_ “Hey, remember us? We’re still here, and your premium might just be hiding a little surprise!”_ It’s personable, friendly, and could entice them to return.

And when it comes to handling negative reviews,** AI is your ally**. It can quickly flag any unfavorable feedback, allowing insurers to address issues before they escalate.

With AI integrated into customer interactions, relationships become more dynamic and responsive. It’s akin to injecting a bit of humor into a dull meeting—keeping everyone engaged and satisfied. This proactive strategy not only boosts retention rates but also helps small and medium-sized insurers stand out in today’s crowded marketplace.

Wrapping Up: The AI Revolution in Insurance

For small and medium-sized insurers, adopting AI technologies is no longer optional; it’s essential for maintaining a competitive edge in an evolving market. By strategically implementing AI, these companies can unlock unprecedented levels of efficiency and elevate customer engagement.

As the landscape of insurance continues to shift, those who effectively leverage AI will redefine industry standards and lead the way into a more innovative future.

The path forward is clear: seize the opportunities AI presents to drive transformation and success in your organization.

If you’re looking to integrate AI into your insurance operations, Antematter is ready to support you on this journey.