Can insurers profit from artificial intelligence?

Can insurers profit from artificial intelligence? | Business America Insurance

How AI can save insurers time and money

Can insurers profit from artificial intelligence?


By Nicole Panteloucos

Supporting various functions such as customer service, claims processing, underwriting and fraud detection, AI’s ability to analyze large data sets and process information will continue to revolutionize insurance.

Nirmal Ranganathan (pictured), vice president of engineering, AI, at Rackspace Technology, spoke with Insurance business on how insurance companies can leverage AI to generate cost savings in their businesses.

The value of AI

According to recent McKinsey estimates, AI technologies could inject up to $1.1 trillion in annual value to the global insurance industry.

Of that sum, about $400 billion is expected to come from improvements in pricing, underwriting and promotional technologies, while an additional $300 billion is expected to come from AI-driven advances in customer service and personalized offers.

What are the benefits of using AI?

Ranganathan noted that insurance companies often don’t have the ability to conduct thorough audits on every claim they receive. Instead, they may choose to use sampling techniques to confirm the accuracy of their resolved claims.

Talking about the benefits of leveraging AI for claims auditing, Ranganathan said, “Right now, auditing is a very human-intensive task, but if we introduce AI, you can review every claim and provide a first-step accuracy check, and then a human can take a quick look at things to verify. If you can catch those mistakes, it can save a company millions of dollars.”

The industry as a whole recognizes these benefits, as evidenced by a recent survey by Gradient AI, which indicated that more than 90% of insurers plan to increase their investment in AI.

In a market characterized by nuance and complexity, Ranganathan highlighted the potential of AI to assist in policy comparison, ensuring insurance professionals select the most suitable products for their clients.

In addition, AI can streamline the processing of information and images in claims files, easing mundane tasks and allowing insurance professionals to focus on higher-value issues.

“AI opens up the possibilities for us to do other things, and this is how society has grown over the centuries. As things got simpler, we focused on the next tough problems,” said Ranganathan.

While noting the many applications of AI in insurance, Ranganathan emphasized that there will always be a place for human expertise. Top of Form

“There are many scenarios where the human element is of value,” he said. “There’s only so much an AI can reason. It can usually get you 90-95% of the way, but that 5% element usually requires a human.”

Third party risks and biases

Despite the time-saving and cost-saving benefits of AI, Ranganathan said with more technology comes more responsibility.

He noted that when insurance companies choose to integrate third-party AI technology into their services, they need to be aware of the providers’ terms of service.

“I think that’s where a lot of people don’t have that much clarity,” he said. “Especially within the insurance sector. If you’re an insurance provider and you implement AI anywhere in your product, you’re still responsible for explaining what’s going on there, because you issued that AI tool.”

“Very soon, every tool will have some form of AI. So you have to decipher where exactly it’s being used and how it’s affecting your customers,” Ranganathan continued.

Given AI’s tendency to amplify human biases, Ranganathan also said it’s paramount that developers prioritize fairness in their algorithms to mitigate any potential adverse impact.

“That’s where applying responsible AI practices can help ensure that there is proper transparency and accountability,” he said.

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