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Evolution of Insurance Industry Propelled by Generative AI
Evolution of Insurance Industry Propelled by Generative AI

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Introduction -

Ever since Generative AI took Artificial Intelligence to the next level, several industries have shown their interest to leverage its capabilities and improve their operational efficiencies. When big firms started investing in this technology it was accepted to the wider ecosystem and more and more industries started investing time and effort to develop their enterprise level use cases on generative AI.

So how can the insurers leverage this disruptive technology across their entire value chain and what would be the correct approach in implementing Generative AI to enrich the operational excellence and profitability?

The insurers have traditionally depended on legacy systems and manual processes across insurance value chain. It has relied on human-centric manual methods of standardized underwriting, claims processing, and customer service. Generative AI has the potential to revolutionize the insurance industry by combining human creativity with artificial intelligence. This technology has the ability to create new services and business models to improve productivity throughout the insurance value chain.

Opportunity -

The global market expansion is set for generative AI in the insurance sector with projections showing growth According to Allied Market Research the report, the generative AI in insurance industry generated $ 761.4 million in 2022, and is anticipated to generate $14.4 billion by 2032, witnessing a CAGR of 34.4% from 2023 to 2032.

Generative AI unlocks new opportunities and improves business processes in the entire value chain by streamlining operations, delivering better customer experience and profitability to the organizations. Generative AI delivers opportunities starting from streamlining claim process, automating underwriting, better risk assessment to efficient personalized customer experience enabling operational efficiencies for insurers. Generative AI supports analysis of unstructured data with automation to generate insights on new risk factors, dynamic risk monitoring and personalized risk pricing drives efficient underwriting decision and accurate risk pricing. Generative AI has the potential to revolutionize the insurance industry, and companies that use Generative AI to automate tasks and leverage its capabilities responsibly can stay ahead towards the future of business.

Generative AI Use Cases in the Insurance Industry -

Insurers are experimenting with a wide range of use cases by implementing Generative AI in entire insurance functions. Some of the key use cases are highlighted below:  

Personalized Insurance Policies:

Generative AI enables insurance companies to deliver more personalized policies tailored to individual customers’ needs and risk profiles. Gen AI can study huge dataset and generate individual risk profiles to provide accurate quotation. Gen AI based algorithms can generate customized coverage options, risk-based pricing, and terms, enhancing the overall customer experience.

Automated Underwriting:

Insurers leverage Gen AI capabilities to automate the data collection process and analysis for accurate risk assessment and better decision making. Gen AI algorithm studies records and historical data, identifies patterns, predicts risks for an efficient underwriting decision. For example, a life insurer can leverage generative AI algorithms for a better analysis of an individual’s medical records, lifestyle information, and family history to make more accurate underwriting decisions enabling faster policy generation and enhancing customer satisfaction.

Streamline Claims Processing:

Generative AI can reduce manual intervention by automating claim processing in extraction and faster data validation from claim documents, enables insurers to execute accurate risk assessment and settle claims in quick turnaround time. Generative AI ensures streamlining the claim process with automation creates hassle-free claim settlements, improving customer satisfaction. For example, P&C insurers utilize generative AI to streamline claim processes by automating loss assessment of the damaged property by natural disasters and quick claim settlement for affected insured.

Fraud Detection and Prevention:

Generative AI analyzes vast amounts of data by identifying patterns of fraudulent behavior. AI-powered algorithms detect suspicious claims in real-time, enabling insurers to take proactive actions beforehand to avoid fraud and reduce financial losses. For instance, health insurance companies can detect anomalies in medical claims by analyzing the billing data, revealing potential fraudulent claims, and save costs.

Virtual Assistants and Customer Support:

Customer-insurer interaction is reaching new heights with the implementation of this new technology. Generative AI-based advanced chatbots and virtual assistants provide customer support in real-time, handling not only customers’ policy inquiries and claims status but also engage in handling complex requirements. Virtual assistants provide seamless tailor-based policy recommendations to individual customer needs, ensures in delivering a holistic customer experience.

Conclusion -

Implementation of Generative AI in business use cases illustrates its potential to transform the insurance industry to the next level. It can provide real-time support to both the insurers and the customers. Generative AI algorithm is unlocking new innovations and opportunities continuously. It streamlines claims processes, automates underwriting, improves risk management with proactive fraud detection while enhancing operation efficiencies. For the customers, Gen AI provides more accurate and personalized policy recommendations, addresses complex customer queries on real-time basis and enhances claim support, delivering a new level of holistic customer service experience overall.

However, Generative AI is at the nascent stage currently, but while implementing it in operations, it is important to give proper attention towards the risk factors like data privacy, regulatory compliance, and ethical considerations. The industry is moving ahead with ever-evolving technological innovation and organizations with a responsible approach can unleash immense opportunities for their business functions with Generative AI in the future.

Reference -

https://www.mckinsey.com/industries/financial-services/our-insights/insurance-2030-the-impact-of-ai-on-the-future-of-insurance

https://www.gartner.com/en/documents/4461799

About the Authors -

Sneha Mukherjee (https://community.nasscom.in/user/67869/profile)

@ sneha11

Provides research solutions pertaining to market trends, sales enablement, strategy enablement, business transformations and innovations. Advisory skills include corporate business and research analysis, opportunity assessment, organizational strategic initiatives assessment and technology transformations. Sneha holds a B. Tech. in Computer Science and Engineering and an MBA in Marketing. Personally, she is a fitness enthusiast and loves dancing.

Saswata Chakraborty (https://community.nasscom.in/user/67727/profile)

@ saswata11

Provides market research and advisory in Banking, Financial Services, and Insurance industry with 3 years+ experience. Worked in multiple research engagements for sales enablement, strategy enablement, opportunity assessment, drive organizational strategic initiatives and building thought leadership. Saswata holds a B. Tech in Civil Engineering and an MBA in Marketing and Business Analytics. Personally, he is fond of travelling and likes to play Cricket.

 

 

 

 

 

 

 

 

 

 

 


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Saswata Chakraborty
Research Analyst

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