TL;DR – Our version of “I’m not reading all that, *SparkNotes pls.”
- AI in insurance uses data and machine learning to automate claims, detect fraud, personalise policies, and support customers 24/7.
- AI improves underwriting, pricing, and service delivery efficiency—think faster claims and fairer premiums.
- Key benefits include faster claims processing, fraud detection and risk assessment, innovative underwriting and enhanced customer support.
- Future trends include hyper-personalisation, AI-backed cyber protection, and stricter regulations (like the EU’s AI Act).
- Despite the tech, AI still needs human oversight for empathy, ethical decisions, and complex claims.
Since ChatGPT’s 2022 launch, Artificial intelligence (AI) has been the topic on everyone’s lips.
Artificial intelligence is quickly transforming the industry, making processes like risk assessment, claims and customer service faster, fairer and more efficient. From streamlining claims to detecting fraud, AI-powered insurance reshapes how providers support and service clients, assess risks, and price policies.
But what is the future of AI in the insurance industry? And why should South African policyholders care?
Pineapple’s guide explores the real-world impact of AI in insurance, including the benefits and detailing how AI-powered claims processing and AI in underwriting and risk assessment work.
What is AI in Insurance?
As Wikipedia defines it, AI “refers to the capability of computational systems to perform tasks typically associated with human intelligence, such as learning, reasoning, problem-solving, perception, and decision-making”.
Simply put, artificial intelligence helps machines and computers imitate human actions to solve problems and accomplish tasks more efficiently. This allows insurers to make faster, better and more accurate decisions.
It’s important to note that artificial intelligence is an umbrella term. There are seven main types of AI, each classified by its capabilities:
- Narrow AI: AI designed to complete particular actions; unable to independently learn.
- Artificial General Intelligence: AI designed to learn, think and perform at similar levels to humans.
- Artificial Superintelligence: AI that can surpass humans’ knowledge and capabilities.
- Reactive Machine AI: AI capable of responding to external stimuli in real time; unable to build memory or store information for the future.
- Limited Memory AI: AI that can store and use knowledge to learn and train for future tasks.
- Theory of Mind AI: AI that can sense and respond to human emotions, plus perform the tasks of limited memory machines.
- Self-Aware AI: AI that can recognise others’ emotions, plus has a sense of self and human-level intelligence; the final stage of AI.
Instead of relying on a person’s assessment, which may result in human error or bias, AI in insurance uses vast amounts of data to:
- Accurately assess risk
- Process claims in real-time
- Personalise policies and premiums
- Offer 24/7 customer support (through chatbots and smart assistants)
It’s like having a digital assistant that instantly reviews claims, checks for fraudulent activity, and offers personalised policy recommendations. It can also review documents, answer questions, and instantly spot red flags.
The result? Faster and more accurate insurance processes.
AI-powered insurance solutions are transforming back-office and customer-facing operations, ensuring a seamless insurance experience.
How AI is Transforming Insurance: Key Benefits
We’ve already touched on the benefits of AI insurance. But, given AI’s daily evolution and rapid improvements and upgrades, there’s still much more to explore.
So, without further ado, here’s how AI is transforming the insurance industry:
1. Faster Claims Processing
Traditional claims processing can be slow, often involving manual data entry, paper-based documents, and multiple handoffs between departments. AI can help automate many aspects of the claims process, namely data entry and claims approval, image and video analysis and fraud detection. This can significantly speed up claims turnaround times, meaning quicker claims settlements and lower operational costs. Plus, AI promotes accuracy, helping to minimise errors and inaccuracies.
2. Improved Fraud Detection and Risk Assessment
Insurance fraud is a major issue, costing the industry billions each year. Thankfully, AI algorithms can identify suspicious claims by analysing claims history, customer behaviour, and even social media behaviour, which a human might miss. AI can also analyse a broader range of data, such as credit history, driving record (fines and traffic tickets) and geographical location, to better assess risk. This allows insurers to personalise their insurance policy pricing, helping to reflect a driver’s unique risk profile, leading to fairer premiums.
3. AI in Underwriting and Policy Customisation
Where traditional underwriting can be time-consuming and labour-intensive, AI automates data collection and analysis. This allows insurance underwriters to assess risk more efficiently and create tailored policies. Underwriters can create fairer premiums and custom insurance policies by analysing individual risk factors like a client’s driving history and lifestyle.
4. AI-Driven Customer Support
Long wait times and impersonal interactions can make clients feel frustrated and unhappy. AI-powered insurance solutions like chatbots and virtual assistants can provide instant and personalised customer support. Chatbots can answer frequently asked questions about insurance coverage, provide policy information and help guide customers through simple processes outside an insurer’s operational hours. AI tools can also handle routine inquiries, freeing human agents to focus on complex issues. This means improved customer satisfaction, reduced call centre costs and greater customer convenience.
It’s safe to say that artificial intelligence is rapidly reshaping the insurance landscape, offering solutions to ancient insurance problems. Technological advancements promise a future where insurance is more proactive, personalised, and seamless.
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Practical Applications of AI in Different Insurance Sectors
Remember our earlier question, “And why should South African policyholders care [about AI in insurance]?”
To fully understand the impact of this technology, we must move beyond theory and examine its practical application. Let’s examine the future of AI in the insurance industry and how this tech can benefit insurance providers and policyholders.
1. AI in Car Insurance
- Telematics and AI adjust premiums based on driving habits. Telematics devices are installed in the vehicle or your phone as an app to collect data on driving behaviour. AI algorithms can analyse a driver’s speed, acceleration, and braking to assess an individual’s driving risk.
- AI-assisted accident detection enables instant claims approval. AI can analyse data from sensors and dashcams to detect accidents in real time and determine the extent of the damage. Insurers can use this information to compare the accident scene to historical data to identify patterns and potential fraud. This automation means faster claims settlements, reduced administration costs, and more accurate claims.
2. AI in Health Insurance
- AI customises preventative health plans based on lifestyle data. AI can give insights into potential health issues before symptoms even occur. It can also provide tailored exercise regimes, dietary plans and reminders for health check-ups.
- AI improves medical fraud detection and risk assessment. Given AI’s capability to identify patterns and anomalies, it can help insurers flag fraudulent activity like duplicated claims and suspicious billing. This can help the insurance industry as a whole reduce financial losses and protect policyholders from the costs of fraud.
3. AI in Digital Insurance
- AI can process digital insurance applications instantly. Digital insurance (buying insurance, managing policies, and submitting claims) relies heavily on technology. Natural Language Processing (NLP) programmes help computers and digital devices to recognise, understand, and generate text and speech, allowing automated data extraction. This means significantly faster application processing times, meaning clients can be insured within minutes. Other benefits of AI in insurance include improved accuracy, reduced errors and greater convenience.
- AI-powered chatbots reduce customer wait times. AI helps enhance the efficiency of time-consuming tasks like data entry and document processing, which frees up human agents. They can then focus on complex claims, build client relationships, and provide personalised advice. This helps reduce customer wait times, which means clients can receive assistance much faster, leading to fewer frustrated and irate clients.
AI and the Future of Insurance: What’s Next?
The future of artificial intelligence insurance is predicted to accelerate further. Brokers, clients, and insurance providers are expected to become more adept at using advanced technologies to enhance decision-making and productivity, lower costs, and better optimise a customer’s insurance experience.
That said, the adoption of AI in insurance will require constant vigilance.
As technology evolves, the insurance industry must evaluate the benefits, challenges, and changes to ensure that using artificial intelligence is never detrimental to a client.
Predictions and Emerging Trends:
- AI is automating more back-office operations for efficiency. Artificial intelligence is poised to take over more complex back-office processes beyond simple automation. Administrative tasks like policy issuance and renewals, generating financial reports, and predicting economic trends may lead to less human error and improved accuracy. Robotic Process Automation (RPA) bots can boost efficiency by completing mundane and repetitive computer-based tasks and processes.
- Greater regulation and transparency in AI decision-making. Using AI to assess client risk profiles could introduce discriminatory practices, opening insurance providers to serious liabilities. Security and data privacy concerns mean regulations around how AI uses and stores sensitive client information. That is why, in July 2024, the European Parliament and the European Council adopted the AI Act, which aims to “facilitate a smooth implementation of applicable regulations to the use of AI in the insurance sector”, hoping that it’ll lead to enhanced accountability and fairness.
- AI-enhanced cybersecurity for insurance fraud prevention. Not only is insurance fraud a significant concern, but it’s an expensive inconvenience. Kagiso Mogale, a senior manager of fraud and investigations at ABSA, said fraudulent activity is becoming more sophisticated. “Fraud today is a high-tech game of cat and mouse… Technology is a double-edged sword in our line of work,” he said. Thankfully, AI for fraud detection in insurance means machine learning models can adapt and learn from new fraud techniques. This means more effective fraud detection, where automated investigations can be brought forward for human review.
So, the question of “How is AI transforming insurance?” can be summed up this way: artificial intelligence has significantly transformed various aspects of the industry, and these key predictions will further shape its trajectory.
The future of AI in the insurance industry promises to improve business processes, decision-making capabilities, and customer service support.
The Human Element: Why AI Still Needs People
Another topic of conversation is whether AI will replace the need for human intervention.
While artificial intelligence tools promise to enhance risk assessment and underwriting, they can never replace the human element, nor do they want to. AI can be a collaborative assistant, helping insurance professionals make better decisions while the human remains entirely in control.
Artificial intelligence tools are skilled at analysing large datasets, identifying behavioural patterns and picking up anomalies. But, underwriting requires a nuanced judgment that AI can’t fully replace.
Similarly, AI is trained using historical data, which may not always account for unique cases and outliers.
Sensitive and complex cases involving novel risks, unusual claims, or intricate financial situations need human expertise to make sound decisions. So, while AI can make recommendations or provide insights, the final decision should lie with qualified human professionals.
Frequently Asked Questions: AI in Insurance
- What is AI in insurance?
Artificial intelligence (AI) in insurance refers to using AI and related tools and technologies, such as machine learning, to enhance insurance processes, such as issuing policies, processing claims, and providing customer support. The benefits of AI’s incorporation into the insurance industry include automating processes, analysing large amounts of data for risk assessment, detecting fraud, and personalising insurance products and services.
- How does AI detect insurance fraud?
Artificial intelligence (AI) in insurance uses machine learning to analyse large datasets and identify patterns. Any inconsistencies are flagged and investigated for fraudulent activity. This means scrutinising claim details and analysing behavioural data to detect anomalies in a client’s insurance documents.
- Will AI replace human insurance agents?
Artificial intelligence (AI) was never designed to replace human agents and other insurance professionals. By automating routine tasks, providing data-driven insights and enhancing efficiency, AI tools allow agents to focus on complex cases and maintain customer relationships.
Conclusion
It’s safe to say that, unlike the NFT craze, AI is anything but a passing trend. Artificial intelligence and insurance go hand-in-hand, meaning this tech revolution promises increased fraud detection, tailored underwriting and efficient insurance processes.
AI in insurance allows clients to enjoy faster claims, better pricing, and improved customer experiences. Coverage is enhanced through customer service that understands your needs.
Looking for a modern, AI-powered insurance experience? Get a quote today and see how Pineapple uses AI to make insurance simple and fair.
Please note: The information provided above is for informational purposes only; you should not construe any such information as legal or financial advice.
Pineapple (FSP 48650) is underwritten by Old Mutual Alternative Risk Transfer Insure Limited, a licensed Non-Life Insurer and authorised FSP. T&Cs apply.
