How Does Artificial Intelligence Influence the Cost of Your Insurance?

Artificial Intelligence (AI) is an increasing presence in the insurance industry.

This is because insurance deals with large amounts of data that humans cannot process in the amount of time that AI can process. AI uses and processes data in a way that is far beyond human capability. It can process data continuously without breaks, vacations, bias, with far fewer errors, and it can do so in a matter of seconds. Typically, the only errors AI makes are a mistake in the program or an error in the data. However, with the latest advancements in technology, AI is getting smart enough to correct errors on its own. AI's capacity is unimaginable and can be used to help insurers underwrite risks and process and settle claims.

Artificial Intelligence and Underwriting

For commercial accounts, underwriting by a human can be tedious and time-consuming. It can take weeks to determine if an account is acceptable and priced to profitability while remaining competitive. The time it takes will depend on the knowledge and experience of the underwriter. However, with AI, data is automatically generated, and risk acceptability and pricing are determined within minutes. An underwriter will no longer have to research a business on their own. AI will be able to find all data related to the company quickly. Once all the information is gathered and processed, it will be put into an easy-to-read format understood by the underwriter. The underwriter will more than likely have a pricing index with a margin for negotiations and may be able to make coverage changes.

Artificial Intelligence and Claims Processing

A claim rep may be working on multiple claims for multiple clients at one time. Their desk management can range from 10 to 100 claims at a time, depending on the loss's complexity. That's a lot of claims for one person to manage. Further, the rep may be speaking to several clients for just one claim. Thus, the claims process can take several days or weeks to several years, again depending on the complexity. AI can handle claim details, such as reviewing coverage, documenting files, and talking with clients to take statements or answer questions. It can also handle simple first party claims from start to finish, and you may never know you've spoken with a computer through the entire process!

As AI gains prominence, there are many issues to consider.

While AI will take property and casualty insurance to a whole new level by helping underwrite accounts and process claims, there are pros and cons with its place in the industry.

What Are the Pros of Artificial Intelligence?

• It can underwrite main street business faster than a human.
• Accounts without issues, such as claims, new ventures, or credit score issues, will be streamlined with the most accurate pricing.
• It is cost-effective.
• It can free up an underwriter's time to work on larger and more complex accounts.
• It will handle first party property damage only claims from start to finish faster.
• It can interact with customers just like humans via phone, chat, or email.
• It can take loss statements, ask questions, and document files.
• Minimal human interaction is required.
• It can help address the industry's employee shortage crisis.

What Are the Cons of Artificial Intelligence?

• At this time, it cannot handle businesses with gray areas since it does not have the knowledge, experience, or comprehension to discern when an account has an issue.
• There's no human to hear explanations for a large loss, a large reserve, a low credit score or items out of your control.
• AI may create glitches that keep you in a loop, whether in an automated phone system, a chatbot, or an internet site.
• A human must continuously monitor all input and output to recognize and fix incorrect data.
• It does not permit building meaningful personal and business relationships.

While there are many benefits to AI, there are also items that need to be worked through. Insurance is a highly regulated industry to protect consumers. Insurers must adhere to regulations. That's why The National Association of Insurance Commissioners (NAIC) developed principles on the use of AI for insurers.

What Are the NAIC AI Principles?

The recommendations for insurers using AI are the following:

• Adhere to fairness and be ethical by respecting the rule of law through the AI cycle and be consistent with the foundation of insurance.
• Comply with applicable insurance laws and regulations.
• Be transparent to ensure and improve the public's confidence, allow inquiries, review and to seek recourse for AI-driven decisions.
• Maintain robust security throughout the entire AI life cycle.

The technology that produces the data used by AI surrounds our everyday lives. It's in your car, on your phone, on your body, in buildings, on your computer, and even in your bedroom. You name a space we may enter, and it probably has a camera, voice recorder, and live-streaming may be occurring. Insurance companies can use the data collected by this technology to program AI. Some businesses are already using this technology in autos and on employees. This is the reason regulations are vital for the continued success and integration of AI into our lives and business endeavors.