De-risking the insurance industry with AI

The advent of AI promises a transformative impact across the insurance industry in India, which could in fact emerge a frontrunner when it comes to adoption of the technology. Developing a complete digital ecosystem is a critical first step to success in the future, enabling insurers to do instant policy approvals and end-to-end purchasing processing in minutes rather than days or even hours. 

Artificial intelligence is seen as an extremely critical driver of competitive advantage in this decade for people, corporations and countries alike. You may look at it as a bridge to be crossed in the near future, or even a bus you have already missed, depending on who you choose to believe.

However, both perceptions are misleading. Like any new disruptive trend that emerges in a market, it is important to view AI with an informed perspective – basically understanding what the technology can presently achieve and how it can realistically be applied to your business outcomes. A Harvard article points out that AI today can broadly support three organisational needs – automation of business processes, gaining insights from data analysis and engaging with customers and employees.

Even though AI is in the evolutionary stage, some sectors are clearly emerging as frontrunners in adoption of the technology and can provide some semblance of a practical framework for others. Insurance is one such sector wherein companies have begun to reinvent traditional ways of doing business, as they get progressively smarter thanks to artificial intelligence.

This is helping them understand the customer better, sell in more innovative ways and serve their needs more effectively. AI is also helping improve customer experience, claims disbursements, on-line information and fraud detection.

Usage of Artificial Intelligence in Insurance Industry

A recent McKinsey paper confirms that fintech companies and NBFCs are successfully gaining market share and serving their customers at about a third of the operational costs of legacy banks. The same applies to the insurance companies, with first year premiums of Rs 294,406.14 crore (as of November 2020) under their belts. New digital-based companies such as Acko, Go Digit and even PolicyBazaar are enjoying much faster growth rates than insurance companies.

In the last  ten months, insurers and InsurTech brands have been able to provide faster services and enhance customer satisfaction with the help of AI–based technologies like document processing, ChatBots, and effective computing. They have leveraged them in various operations such as processing claims and appeals, insurance pricing and fraud detection. With companies investing in data lakes, bringing different sources of data together and building machine learning models has become much easier and less time consuming. Some of the common applications are as follows:

1. One of the most important applications of AI post-COVID has been the application process of insurance policies itself. Data needs to be mined from various sources. Performing this task manually during the lockdown was next to impossible. But now companies are leveraging AI-based technologies to automatically extract necessary data from documents and accelerate insurance application procedures with minimal errors.
2. AI and automation-based document processing is much faster and less-prone to errors as compared to normal processing. Be it identification documents of past policies or tax/salary documents, computer vision-based technologies are advanced enough to process them within a fraction of a second. During the ongoing pandemic, insurers have also introduced the e-KYC facility for issuing policies to customers. With video-based KYC, customers can purchase life insurance and health insurance from their preferred insurer.
3. AI-based technologies like ‘Conversational AI’ help InsurTech brands and insurers to ensure faster replies to customer queries. Tools like text and predictive analysis help brands detect fraudulent claims, which have surged in the last 10 months. With audio transcriptions and voice analytics, companies can identify outliers i.e., suspicious customers and correlate conversations with details that they have submitted for the purpose of policy issuance or claim processing.

Pioneering AI in insurance

One of the leading players when it comes to AI adoption is Max Life Insurance, which is leveraging technologies like vision, speech and NLP to develop a host of predictive models and cognitive applications. These tools enable the company to deliver a hyper-personalized customer experience.

Max Life has built a focussed in-house team ‘AI works’, which will be responsible for developing and delivering cutting edge ‘Business First’ AI solutions. They are also collaborating with a number of niche start-ups in this space through several AI accelerator programs. The company is further venturing into many other AI-driven initiatives to ramp up on operational efficiencies – from enabling instant purchase experience to AI-enabled automation of decisions for claims processing.

Robo insurance agents

Moving beyond current use cases, companies are attempting to exploit the full potential of AI by investing in robo-advisors, data powered systems and much more. To quote KPMG India: “Insurance companies are heavily investing in technologies like Robo advisory powered with Artificial intelligence. Insurance portals are being powered with powerful bots, which provide financial advice tailored to the policy holder’s income and needs. Data and analytics powered with artificial intelligence are used for writing algorithms for robotic advice and for configuring products as per customers’ needs.”

Photo by Adrianna Calvo from Pexels

Bajaj Allianz Life has a WhatsApp bot called BOING, through which customers are able to engage with the company in real time and get responses to queries on several services they may need with respect to policies like premium payment or fund value. Similarly, AI in the video KYC helps them identify if there is a real human in front of the camera and her/his face is visible (and not a photo) before starting the KYC process. While onboarding a customer, AI can ascertain if the document is correct and personal details match with the information that was entered prior to uploading documents.

Care Health Insurance reduces claim settlement time by half: With the objective to reduce customer servicing time and provide a seamless experience, Care Health Insurance, earlier known as Religare Health Insurance, has introduced an online claims solution – ‘Claim-Genie’ – which is available on its mobile application and website. Through ‘Claim-genie’, customers can file and track claims from the comfort of their homes, and the company has managed to bring down claim processing time by 40-45%.

This has also reduced the number of customer calls that used to come earlier by 30-40%, as customers can see the status on their phone itself. Through AI and ML, the company is also developing a framework to analyse claims and make recommendations to servicing teams.

Shriram General Insurance has also set up a dedicated team that has specialists in machine learning, neural networks, and business intelligence. They already provide seamless instant policy issuance for customers and intermediaries and have the provision of claim settlement through mobile app in a few zones and categories. The company plans to use AI in areas like behavioural policy pricing, enhancing customer experience, personalizing coverage and speedier claim settlement. Data is truly a gold mine, and the manner in which companies use data analytics from acquisition to engagement to servicing to fraud detection will be critical.

HDFC ERGO General Insurance had hired behavioural sciences resources to bring the empathy angle in its communication, even in bot-driven communication, reducing the potential human biases. The technology doesn’t differentiate if the customer is a two-wheeler owner or a luxury car owner. Their AI engines, chatbots and NLP-based emails maintain the same speed and empathy. The company is using NLP extensively for its communications through IVR services, WhatsApp and other chatbot and email communication channels. AI enables them to service a much larger percentage of their customers.

Thorny Issues for insurance companies

The COVID-19 period has been a boon for insurance companies that have managed to leverage AI to improve their business outcomes. However, the pandemic has also posed some critical challenges and questions for these companies.

1. Policy Denials

The COVID-19 pandemic has exposed several faults in our healthcare systems. Patients are stuck between the high costs of private healthcare and the inadequacy of public healthcare. IndiaSpend has reported that many with valid health insurance were not able to claim it for their COVID-19 treatment during this pandemic. Insurance companies offered many reasons for not honouring their claims, ranging from over-charging by hospitals to even telling claimants they had not needed hospitalisation itself.

The pandemic has brought new anxieties and reinforced old ones for people with disabilities: Would they be able to afford treatment and healthcare, for COVID-19 or anything else, without medical insurance?

2. Fighting Fraudulent Insurance Claims During Covid-19

The ongoing global pandemic has caused tremendous disruption in our lives as well as a severe economic impact. Rise in fraudulent activities amidst the crisis has emerged as a major concern. As insurance claims surge, fraud teams of companies have to deal with a busy workload, while also coping with a lot of upheaval and disruption.

Photo by Kevin Ku from Pexels

Rise in number of fraudulent claims

Unfortunately, in the last 6 months, the COVID-19 pandemic has built up an atmosphere under which different people filing for insurance claims face some sort of cheating scope. Over time, this can lead to a greater financial impact for both insurers and customers. Generally, frauds are said to account for around 10% of all claims as per industry benchmarks. But during the pandemic, it is estimated that around 18% of claims contained an element of fraud – both for health and term life insurance – which is mainly attributed to widespread unemployment and economic uncertainty due to the outbreak.

Technology is playing an important role in combating fraudulent claims. Video KYC, digital fingerprinting, Machine Learning algorithms – all are also being used increasingly in analysing customer documents for fraud.

Future-proof for growth

With insurance companies aggressively opting for AI-driven solutions, following are some of the market trends we can expect in the near future:

• Going forward, we are expected to live in a phygital world or a hybrid model of servicing.
• Push to nudge to pull over time will be required for positive results.
• The use of AI and ML could lead to a permanent change in the insurance business.
• The information will directly flow in company’s databases interfaces from the hospitals and diagnostic centres’ systems. Then run that information past in all their algorithms.
• It will define what kind of elements and operative procedures are required and what is the expenditure likely to be incurred in that particular hospital by the particular surgeon and so forth. Within a fraction of a minute, insurer will be able to get back to the hospital with the response helping them with the further cause of action.

Today, leading InsureTech companies are powering a new future for the life and annuity insurance segments. Advanced solutions help them ascertain and qualify the impact of changing regulations and execute action plans to keep them compliant and transparent. The tools should simplify complex environments, reduce costs, workforce dependency, improve fraud detection, and touch upon the possibility of expanding business without crossing the borders physically.

Developing a complete digital ecosystem is a critical first step to success in the future. With a digital platform, insurers can do instant policy approvals and end-to-end purchasing processes in minutes rather than days or even hours. The key success factors are to reimagine the life insurance purchasing process, inculcate a customer-first product suite and deliver a supporting ecosystem that provides a truly digital experience. The convergence of technology capabilities and demographic trends makes it an opportune time to test out new business models that can be adapted to all customers and not just the underserved. Insurance carriers need to re-conceptualise customer-centric solutions that are leveraged through next-gen technologies to improve their digital future-readiness.

Winners in the AI-based insurance era will be those players who harness the power of new technologies. Companies who view this as an opportunity rather than a threat will certainly boom in the coming years. 

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Prof Veena Kumar, Director, CEC, is an established Management Consultant, with 30 years of experience in Corporate Training, Research, Management Education and Consultancy.

She is engaged in conducting in house as well as open training workshops in the Sales and Marketing as well as Behavioral disciplines for organizations. To name a few: like Tata Power Solar (Noida & Bangalore) Map My India, TERI, NetWork 18, Samsung, The Lodhi Hotel, HPCL, Jindal Steels, Jabra Innova, HCL Info systems Ltd., DP Jindal Group, Oberoi Group Of Hotels, Honda SIEL, HCL Radico Khaitan, RMS Technologies etc

 Strategic Selling Skills, Negotiation Skills, Customer Relationship Management, Competency Mapping, Strategic Marketing, Training The Trainers, Customized MDPs, Managerial effectiveness, Presentation Skills, Problem solving and decision making, Professional & Personal Effectiveness etc. are some of the areas for which she has been conducting training workshops. She has a very rich teaching experience as a Visiting Faculty to prestigious Management Institutes of Delhi.