Learn how generative AI in insurance can improve your agency’s approach to claims processing, underwriting, risk assessment, and more.
The insurance industry depends on accurate data input, processing, and data-based decisions, so it’s no surprise that generative AI (GenAI) has been a perfect fit. And it’s not just insurance. Risk management, in general, benefitted generative AI for insurance in efficiency and accuracy improvements for a few years now.
However, many insurance companies and risk managers still haven’t gone all in regarding GenAI, often because the path forward may seem unclear. In other cases, their current system “ain’t broke,” so it wouldn’t make sense to “fix it.”
But, like many insurers, unexpected claims may sometimes put your profit margins at risk, or you may feel you can fine-tune your premium pricing strategies. GenAI can make these and other processes simple, fast, and reliable.
Here are some primary ways GenAI in insurance is changing the game so you can start building a strategy for your generative AI deployment.
The Role fo Generative AI for Insurance Providers
Predictive Analytics
Predictive analytics involves using historical data to predict future outcomes, which makes it a natural tool for insurance companies and any organization involved in risk assessment. As an insurer, you may already use a form of predictive analytics to minimize the risk of setting your premiums too high or too low. Many find the predictive analytics process laborious, especially because there are many data points to consider.
Predictive analytics may be simpler than you think with GenAI. You can upload a spreadsheet with historical claims data to a GenAI system and ask it which kinds of incidents are most likely to occur in certain areas or during different times of the year.
Some risk management solutions make it even easier because they embed a GenAI system and function alongside a statistical predictive analytics engine. Instead of having to interpret the charts, graphs, and numbers you see on the screen for yourself, you can simply tap a button, and the GenAI system will summarize it for you.
In this way, generative AI in insurance hand-delivers vital decision-making information.
Claims Processing
One of the most intuitive applications of generative AI for insurance providers is claims processing because it adds speed and accuracy to your data input and decision-making. Generative AI in insurance plays an especially big role due to the vast number and complexity of claims. Here are some examples of what GenAI can do in the context of a claim:
- Automatically recognize signs of fraud, such as multiple claims being filed for accidents at the same intersection
- Use natural language processing (NLP) to read emails and notes and then information that data into a claims form
- Identify fake images made using AI and then prevent fraudsters from profiting off false claims
- Automatically write reports and summaries of incidents, pulling vital information from the claims form and using it to create a narrative
You can also pair GenAI with optical character recognition (OCR). OCR allows a computer to read text from a document and then digitize it into a text file. Therefore, an OCR system can take a raw PDF with claim information and digitize it into computer- and human-readable words.
Then, a GenAI system can use that data to complete a claims form automatically.
Of course, the area of claims is only one piece of the insurance puzzle. The insurance industry’s capital structure depends on the underwriting process, which is another beneficiary of GenAI.
Transforming Insurance Underwriting with AI
The underwriting process depends on accurate data analysis to reduce the insurer’s exposure to risk. Like many other data-dependent processes, underwriting also benefits significantly from GenAI.
For instance, suppose an insurance company is preparing a package for a delivery business with a fleet of 30 vehicles. Each vehicle has a different age, condition, make, and model. The good news is that the company has carefully recorded all of its vehicle data. The bad news is there’s a ton of it, and the underwriting department doesn’t have the time to sift through and make hundreds of calculations.
The great news is GenAI in insurance can shoulder the heavy work. A generative AI system can take all vehicle data, collate it, compare it to industry norms, assess the level of risk of each vehicle in the fleet, and even calculate a few different premium scenarios. Further, it can incorporate historical data based on weather conditions and the kinds of deliveries the company will make.
While it would not be wise to have AI make the final decision, it can do a lot of the legwork you need before you opt for one choice or another.
Optimizing Pricing
The industry is highly competitive, but with generative AI in insurance, you can get your pricing exactly right — to levels that make your products profitable and marketable.
For some clients, you have to wade through many factors before deciding on a price that fits both their budget and yours. But GenAI can handle this for you.
For example, a business client may have multiple locations, each with inherent risk factors. Ideally, the liability insurance cost for one location should be different than the others. The same goes for workers’ compensation, especially if one location tends to have more or fewer accidents than average.
Even though balancing these factors can result in many hours hunched in front of a spreadsheet, with GenAI, you can rest your brain and back. Your generative AI can analyze all the data from each location and produce a single binder for the entire business that considers all factors. It can also build individual binders for each business unit so you can explain to the customer why their coverage played out the way it did.
Optimizing Product Development
Similarly, with product development, custom-designing products for each business can be difficult. But, in many cases, this is the best choice because each organization’s needs and operational environment are unique.
Fortunately, GenAI in insurance can also help you design custom coverage packages that reduce risk for both your clients and the company. To enable this, you can use your company’s offerings as the knowledge base for a GenAI system. The system can then create a package using a combination of your existing products.
You can also have the system create a completely novel insurance product from scratch. Then, with another prompt, you can have it describe how your company can create a similar package using elements of your current offerings.
However, it’s important to remember that AI is a stepping stone, not a final step, in the process of building attractive insurance offerings. Human insurance experts need to test, validate, and refine the product at every step to ensure it will work for your target market.
Even with ideal pricing and product development, you still may need help with the third leg of the insurance stool: risk assessment. Generative AI excels at this as well.
The Role of AI in Risk Assessment
In addition to using predictive modeling to assess risk, a GenAI-powered system can automatically monitor your market for early warning signs of increased risk. For instance, you can have an AI solution scour news headlines regarding weather- and climate-related events in your target market.
A GenAI solution for your insurance company can take this data and predict the likelihood of incidents in your potential clients’ locations. For example, weather-related events may affect farmers’ crops or the ability of transportation companies to operate efficiently. If your AI system reports high risk, you can nudge your prices up, which helps maintain solvency. On the other hand, if the risk is especially low, you can drop prices accordingly, giving your products more competitive price points.
GenAI for insurance providers can also play a core role in an early warning system. In many cases, elevated risk levels result from a series of events that, over time, culminate in expensive or dangerous incidents. For instance, a construction company may hire a new manager who is less-than-stringent when it comes to promoting worksite safety. A GenAI system can analyze incident reports and inform you ahead of time of the degree to which the new manager raises the company’s risk profile.
Manually scouring through piles of reports can be time-consuming and tedious, and it’s easy to miss a key detail or two. But GenAI doesn’t get tired. It also catches minute details that could make the difference between your company being in the red or black.
Put GenAI to Work for Your Insurance Company Now
Insurance companies are inundated with helpful data every day, and ignoring it could harm your bottom line. However, with GenAI, you can automate much of the tedious data reporting and analysis. This results in profitable premiums, packages that better suit customers’ needs, and more accurate data analysis. While your company reduces risk for its clients, GenAI can reduce the risk for your company.
A well-crafted vision and strategy serve as your safeguard against failure and unlock AI’s full promise. But first, you need to know if your company is ready for AI.
Are you ready to explore how artificial intelligence can fit into your business but aren’t sure where to start? Our AI experts can guide you through the entire process, from planning to implementation. Talk to an expert
