Rob Schumacher, Co-Founder of Feather Insurance
The insurance industry is integrating AI into its operations at a faster pace than many other sectors. Use cases span automated claims processing and quote generation to enhanced fraud detection and personalised agent training. But the next era of insurance won’t be defined by AI alone. It depends on striking the right balance between automation and human judgement to deliver better outcomes for customers, and ultimately build a more resilient future for the industry.
Optimising Processing Time and Managing Risk
A major advantage of AI is great efficiency gains. Insurance firms recognise this value: IBM finds insurers are devoting as much as 40% of their AI budget to efficiency gains and operational effectiveness. Their AI investment is paying off, with insurers reporting a reduction of claims processing time by 18.6% with 15.45% faster product times-to-market.
In an industry awash with data, there are myriad uses for AI and its vast data-processing powers. Summarising tasks and call summaries are obvious applications but the real excitement comes from the deployment of generative and agentic AI. Gen AI’s reasoning, judgement, creativity, and empathy capabilities are proving pivotal to the future of insurance, assisting in a range of critical tasks including real-time pricing analysis, accurate and personalised policy recommendations, customer communication support, and ‘first notice of loss’ insights.
Another area of special value is in managing risk. Gen AI has the ability to support in customer risk assessment, liability determination, and fraud prediction and detection – critical in a sector where British insurers face over a billion pounds in insurance fraud each year. With AI tools being leveraged by criminals to create fake identities, forge documents, and bypass verifications systems, it’s essential insurers are also making the most of the latest technology.
Also Read: AI is Supercharging Attacks, not Security
Conserving the Human Touch
However, the end goal isn’t to replace all underwriters with algorithms. It’s the balance of AI and human knowledge that will elevate the industry and firms must invest in both advanced technologies and human expertise in order to maintain it. The insurance industry has an ageing workforce and well-documented talent-shortage: the UK’s Chartered Insurance Institute estimated last year that a quarter of the sector’s talent is due to retire within the next decade, while only 4% of young people consider a career in insurance appealing. Attracting and investing in young talent – as well as AI – will be essential to the survival of firms and the industry as a whole.
Also Read: Fighting Insurance Fraud: How to Detect and Prevent it
Human oversight of AI processes is essential in ensuring tools are working in the ways firms want. Yet as much as people have a role to play in humanising AI, AI can help ‘humanise’ and increase connection with a firm’s customers. McKinsey details how one insurer introduced intelligent automation when offering quotes to prospective customers and selling policies – resulting in 80% of transactions moved online and a dramatic uptick in customer satisfaction scores. Leveraging a 24/7 chatbot enabled another insurance carrier to serve its customers after-hours, seeing an 11% increase in the number of prospective customers who progressed to buying policies, and yet another used AI to generate its daily 50,000 claims-related communications, reporting these were clearer and more empathetic than those written by humans. All these examples demonstrate how AI can create a more personalised, connected experience for customers and vastly improve insurers’ level of service.
Creating a Human-Centred Strategy
The next era of insurance will revolve around a combination of artificial and human intelligence to create a smoother, faster, more precise experience. A successful AI strategy will value the human touch; recognising that the goal of new applications isn’t tech for tech’s sake, but to enhance the work of agents and refine the customer journey. The sector’s next chapter will be one of increased efficiency, managed risk, and streamlined operations with each customer interaction featuring an element of it human touch.