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May 01, 2023

Unbox the future of insurance with AI and real-time decisioning

Credera Team

Credera Team

Unbox the future of insurance with AI and real-time decisioning

The insurance industry is facing a daunting challenge in detecting and preventing fraud. The Coalition Against Insurance Fraud reveals that insurance fraud costs the US economy at least $308.6 billion annually.

Annual losses to US insurers due to fraud

With such alarming statistics, it is essential for insurance companies to leverage advanced technologies like artificial intelligence (AI) to prevent and detect fraud before it becomes a liability.For example, a few months ago, a social media trend highlighted a security flaw in certain car models resulting in a spike in car thefts across the United States. On one hand, car owners were at a loss on how to protect their cars and their insurance claims. On the other hand, insurers were grappling with more claims than usual.The magnitude of the trend could have been contained by leveraging proactive, dynamic rules identified by trend-spotting AI. An AI-based insurance software could have quickly identified patterns about car thefts from the data feed. It could have identified the models affected, the areas where the thefts were happening, the customer profiles of the claimants, etc. Insurers could have used these insights to take proactive measures; even better, they could have implemented recommendations provided by the software.The insurance industry is highly competitive and is constantly evolving to meet the needs of new-age customers. Despite advances in technology and customer service, the industry still faces some challenges that need to be addressed. One of the concerns is customer dissatisfaction. Many customers are unhappy with the level of service they receive from their insurance providers, which can lead to negative reviews, lower customer retention rates, and reduced profitability.Another challenge that the insurance industry faces is the need to streamline and automate cumbersome manual processes. Many insurance providers still rely on traditional methods for underwriting and claims processing, which can be time-consuming and error-prone. This can lead to delays in claims processing and payments, which can further exacerbate customer dissatisfaction.

Insurance management: The four pillars of success

Thankfully, with Areteans’ AI solution, Digi Insurance, insurance companies can adopt a four-pillar approach to tackle these challenges.

Proactive, predictive, personalized selling

The first pillar involves a proactive approach to selling. AI-powered risk assessment and predictive analytics can be used to identify high-risk customers and offer them customized policies that meet their unique needs. Areteans’ Digi Insurance, for example, enables insurers to launch new products and services quickly by leveraging pre-built AI models for customer classification. With individualized plans and premiums, insurers can drive increased conversions and profitability.

Dynamic recommendations go beyond the annual purchase and renewal approach to a continuous cycle as offerings constantly adapt to customers’ needs and behaviour patterns. Customer interactions become more meaningful as they are tailored to clients’ current and future needs.

Increasing efficiency and accuracy in underwriting

As per a survey by Accenture in 2022, 40% of underwriters’ time is spent on non-core and administrative activities. Automation and AI in underwriting can help insurers to take advantage of the increasing volume and variety of data available. By leveraging predictive analytics and multivariate rules, insurers can improve the accuracy of underwriting decisions and focus more on risk assessment, leading to better pricing. Additionally, customers will benefit from a less intrusive decision-making process.

Our product offers a highly sophisticated underwriting system that provides enhanced underwriting controls through configurable and adaptive business rules, as well as proactive risk prediction. By utilizing analytics to power risk evaluation, risk selection, and underwriting decisions, our product aligns underwriting outcomes with profitability and risk objectives. This ensures that insurers can make informed decisions based on data-driven insights and achieve better outcomes for their customers and their business.

Managing and mitigating risk

The third pillar involves risk management and mitigation. With AI-powered risk assessment, insurers can identify high-risk customers and sell policies with the right conditions. Digi Insurance can recognize underwriting hazards and streamline risk selection. It can recognize the propensity of a claim based on the demography, the location, among other factors, effectively categorizing the person into predetermined pricing groups.

By continuously processing vast amounts of structured and unstructured data on driving conditions, traffic incidents, and other vehicle and driver information, Digi Insurance can automate the determination of accurate risk profiles and decide on precise policy premiums.

Streamlining and strengthening claims management

The biggest issue facing insurers is managing claims, specifically bad or fraudulent claims. Around a fifth of the premium policy book of insurers can be classified as bad or excess claims, and depending on the sector, this can run into millions or billions of dollars.For example, providers can expect massive savings when it comes to bad claims in home insurance. A common fraud is buying insurance after a bad weather event and claiming it a month later. Digi Insurance helps identify cooling periods of policies in such scenarios, saving insurers a significant sum.

In the US insurance market, excess claims significantly impact insurers’ bottom lines. Our AI-based solution, Digi Insurance can analyze claims data to identify and prevent wrong and fraudulent claims from being accepted or paid by the company. Detecting potential fraud, non-compliance, and other high-risk scenarios enables insurers to effectively prevent financial losses, improve customer loyalty, and maintain their reputation.

Reimagining insurance with Digi Insurance

The trend in the insurance industry is moving sharply towards AI. According to a PWC research, that almost two-third of insurance companies that have already invested in AI report better customer experience, while half of them report improved decision making. The 2022 Gartner CIO and Technology Executive Survey states around 35% of insurance CIOs are increasing their investments, and 61% consider AI as highly valuable in responding to industry trends.

To state the undeniable importance of AI in streamlining claims and preventing bad ones, we can look at the healthcare industry, which is also turning to AI solutions to mitigate risks and prevent fraud. According to recent surveys, more than a third (34.1%) of healthcare firms are “very” or “extremely” interested in using smart agent-based AI. With AI-powered risk assessment and claims processing, healthcare providers can reduce fraudulent claims and mitigate risks effectively. Areteans’ Digi Insurance can be leveraged by insurers to fast-track the launch of new products and services and quickly analyse massive amounts of data for a personalised service. It can incorporate a dynamic, adaptable underwriting process that offers intelligent risk predictions and next-best underwriter recommendations. The product configurator helps users to configure products, plans, coverage and eligibility with an easy WYSIWYG interface. Insurers can release products quickly, differentiate products and stay ahead of the curve. By using advanced AI, our solution can also detect probability of fraud and streamline claims processes from data capture to payout.

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