How AI helps insurance companies adapt to challenging times
The insurance industry is facing unprecedented challenges. Changing climate and weather patterns have led to an increase in both the frequency and scale of natural disasters like wildfires, floods and hurricanes — which leaves insurers on the hook for bigger payouts than ever.
AI can be a valuable tool for helping insurance companies succeed in this complex business environment. Insurers are increasingly turning to AI to help underwrite, reduce risk and tackle claims, all while managing costs.
Let’s dive in deeper to learn how AI can benefit insurance companies, plus what you’ll need to do in order to better integrate AI into your business.
How do AI tools benefit insurance companies?
AI tools can help companies in the insurance industry to operate more efficiently or effectively in four key areas. These include:
1. Underwriting
AI can help providers improve their insurance underwriting and policy pricing. This can help reduce the amount of risk insurers face.
For example, when evaluating risk models, this might include performing an AI-powered image analysis of satellite or drone photos during the underwriting process for a homeowner’s insurance policy.
Doing this could help insurers to better assess the likelihood of a wildfire occurring or model risks for flood damage. Insurers could then make more sophisticated underwriting decisions.
And for both new and existing policyholders, doing this kind of image evaluation could also give companies the opportunity to suggest corrective action, like clearing brush to lower the risk of fire.
2. Claims
An increase in severe weather events means more claims — which also translates into slower processing times. This is frustrating for both insurers and their customers.
Insurance companies are experimenting with AI as a tool to speed up claims processing and reduce the burden on already overstretched team members. AI can help read and summarize claims for the agent handling the claim, potentially cutting down on the number of working hours needed to process them.
3. Policy sales
AI can also help improve the sales process for both insurance providers and third-party brokers. Those who work in insurance sales sometimes say that one of the most boring, challenging parts of insurance sales is having to read through hundreds of pages of policy documents to understand the policies they’re selling. But AI can make this process easier.
For example, AI might read through an insurance policy and provide a summary to sales team members, who can more quickly understand what the policy covers. Those team members would then be free to spend more of their time doing higher-level, customer-facing work.
This can reduce burnout and increase job satisfaction.
4. Customer journey
Similarly, AI tools can help consumers better understand their insurance policies as well. If a consumer is deciding between two different policies, an AI can summarize the policies and even compare them against each other to help the consumer decide which might be a better fit.
This approach can help make buying insurance less intimidating or confusing from a consumer perspective.
AI can also assist customers with policy payments. And when a customer makes a claim, AI can help make sure the customer understands how the process works and what is covered.
What are the major barriers to change when adopting AI?
For insurance providers, as with most businesses, adopting AI is not as simple as just firing up Microsoft Copilot or ChatGPT. You’ll need to overcome key barriers to change in order to successfully integrate AI into your business to a degree that it provides real value.
Company mindset
In many cases, the single biggest challenge is actually culture. Insurance companies are understandably risk-averse, and some have been following roughly the same business model for decades or even hundreds of years.
However, to succeed at better using AI within your organization, you have to become a little more tolerant of risk. This starts with a willingness to embrace change. Have a spirit of creativity here.
Consider that just because your business has always done things a certain way doesn’t mean that there’s no room to adapt or try new things. And encourage this same mindset among your team.
People and culture
Here’s something you may not expect: If you want to succeed in adopting AI, you need a people-centric culture. To be blunt: People are afraid that AI might take their jobs — so if you want people to embrace AI, you need to make sure they feel valued and like they have room to evolve alongside your business.
You’ll need to exercise your creativity and imagination to think about how you can adapt your organization to the AI era. How can you use AI to enhance or improve roles rather than getting rid of people?
Carry your people along with the chance, and you’ll get much more buy-in from your team.
Data quality and governance
Your data quality determines your AI results. If you don’t have a solid foundation for data governance and strategy, you’ll fail when trying to use AI to solve enterprise-level problems.
You need to make sure that your data is clean, organized and accurate. AI will use whatever data you give it — good or bad — so it’s up to you to make sure it’s the former.
Bad data increases the risk of hallucinations, inaccurate output and other risks that can cost you both money and the trust of your customers. However, implementing a data-conscious culture that prioritizes smart data usage and a clear data strategy will help minimize those risks and deliver better outcomes.
What are the key steps for insurers who want to better use AI?
Adopting AI as an effective tool for your business is a process. Here are some of the key steps.
- Learn about AI: Before you actually start using AI, you need to understand what tools exist and how they might serve your business.
- Find pain points: Sit down with your team and identify key business problems that you could use AI to solve. These can be either internally facing or customer-facing problems, but regardless, make sure that any AI you use is meant to address a specific problem.
- Start with a small pilot program: Don’t try to implement AI everywhere at once. Start with a small pilot program to solve a specific problem, then learn from that as you integrate AI more broadly.
- Rebuild your processes and workflows: As you incorporate AI into your business, rebuild your processes from the ground up to include AI in how you work.
- Continue training your team: Offer ongoing professional development to educate your workforce, create buy-in and help your team learn how to use AI more effectively. This is key to long-term success.
How Wipfli can help
Wipfli helps insurance companies upgrade their systems and processes to improve performance. Ask us to assess how new technologies like AI can strengthen your business and help you integrate them into your work. Learn more here.
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