Why insurance automation will define the industry
Whether you work at a highly innovative company or one that errs on the conservative side, it’s hard to ignore the chatter and the changes brought about by insurance automation.
It’s a topic that’s quickly gaining traction in the insurance industry. As technological innovations around artificial intelligence (AI) and intelligent automation rapidly accelerate and make their way into the workforce, the pressure is on for the insurance sector to adopt.
Currently, four of the top ten insurance companies in the U.S. are using some form of machine learning. Over the next three years, more than 75 percent of insurance companies plan to implement some type of insurance automation to correct outdated processes.
Insurance employees spend 10 to 15 percent of their time on repetitive computer tasks, which wastes several hours of their time each week (e.g. manual underwriting and claims processing, customer database updates, scheduling meetings). These types of tasks don’t help them better serve their customers or earn the company new ones.
Insurance faces another issue that critically affects productivity: a tightening job market. Of all financial service industries, insurance is arguably one of the least glamorous to work in, and as unemployment continues to trend downward, many insurance roles are left unfilled. This causes work to continuously pile up for their employees, yet there’s never enough people or time to get it all done.
Insurance automation solutions enabled with AI is a beacon of hope for insurance companies and their employees as it eliminates repetitive busy work.
For the business, this means that more work gets done. For the employee, this technology offers some relief from the neverending piles of paperwork they face on a daily basis.
If you’re a traditionalist that doesn’t see the value of AI and insurance automation, hear me out:
- AI represents a potential cost savings of $1 trillion to U.S. companies across banking, investment management and insurance.
- Automation ca reduce the cost of a claims journey by up to 30 percent.
- By 2030, manual underwriting will cease to exist for most personal and small-business products across life and property and casualty insurance.
The cost savings alone is enough to spark curiosity in insurance automation. So, how can it save companies so much money? When it comes to automation, it’s all about optimizing workforce processes to accelerate productivity.
Some use cases include (but are far from limited to):
- Automating customer requests. Automatically updating a customer’s address in a database or forwarding a service request to the proper department.
- Document generation. Having data pulled from emails, spreadsheets, applications, etc. and populate a closing form or claim document.
- Scheduling meetings. Scheduling a meeting in an employee’s calendar based on an email interaction.
- Claim processing. Porting information from a database to an application or vice versa to reduce the amount of “copy-and-paste” tasks a claims officer must perform.
These tasks take insurance employees away from their customers. Eliminating, or at least alleviating, the workload for your team allows them to focus on the more productive elements of their job and get more work done.
About 66 percent of insurers believe AI will improve workforce productivity and 98 percent intend to use this technology to enhance the capabilities of workers, which will ultimately increase revenue.
Let’s break down the cost saving expected from insurance automation:
The insurance industry will see $400 billion total cost reduction, which is a 14 percent reduction of the traditional cost base.
- $168 billion of insurance industry costs will be saved by targeting insurance sales staff, customer service agents and commissions.
- $99 billion will be saved by targeting compliance, information services, workflow and accounting systems and other data processing.
- And $125 billion will be saved by reducing claims due to higher underwriting accuracy.
Insurance is typically a late-adopter of new technologies, due to the nature of the work and the vast complexity of the industry. When it comes to AI and automation, they will not have the same luxury.
And because this innovative gap is so apparent, insurtechs have popped up to fill the market void. Venture capitalists globally invested $2.6 billion in insurtechs in 2015, and nearly $1.7 billion in 2016. Tech-driven startups like Lemonade, a rental insurance company, and Metromile, a pay-by-the-mile car insurance company, are pushing traditional insurance companies to rethink their strategies or risk losing customers.
By 2021, insurer spending on this type of technology will reach $1.4 billion. Sooner, rather than later, insurance providers should change their digital strategies and get on board with technological innovations.