ADVANCED SEMANTICS, Artificial Intelligence, Banking & Insurance, Blog
13 March 2018

Three concrete ways to improve insurance economics with artificial intelligence

It’s crunch time for Insurance. Investment yields are declining and combined ratios have exceeded 98% for 3 out of the past 5 years*. Insurers are asking: “What can we change in our operations to improve our economics? ” Concrete answers are now coming from Cognitive Technology, the variety of Artificial Intelligence that deals with knowledge and textual information.

In this post series I want to share three areas where cognitive is delivering unprecedented productivity gains and insight, and leading to deep changes in how insurers do business.

Why Artificial Intelligence is a great match for Insurance

Insurance is particularly people- and paperwork-intensive. Both Underwriting and Claims Management revolve around the production or retrieval of information from documents – such as a policy or a claim package – that capture the specifics of the insured’s case. These are particularly time-consuming tasks that up to now have entirely fallen into the lap of human operators, and on average represent 13% (Health) to 20% (P&C) of the combined ratio*.

What cognitive technology brings to this picture is its ability to read documents much in the same way humans do, in a fraction of the time. It automatically recognizes and aggregates the key pieces of information that characterize each case and reasons on them. This reduces the time spent on such tasks from hours to seconds. The impact is that it takes significantly less time to service a case, and that insurance professionals can focus on the highest-value areas of their jobs, such as decision-making, rather than the more time-consuming, menial tasks. This is what the AI jargon refers to as cognitive automation.

You won’t be surprised that Claims is the first key area where cognitive is changing the game for insurers. (learn more about all three areas in this white paper)

#1 Area : Accelerating Claims

  • Automate claim routing
  • Summarize key claim characteristics
  • Suggest claim valuation
  • Focus claim handlers on high value activities
  • Drive customer satisfaction with faster claims

Claims workflows are critically dependent on proper information flows, but a disproportionate share of claims handlers’ time can be taken up by ancillary informa­tion grooming tasks. Cognitive technology can alleviate a large part of this issue.

When dealing with Automotive Claims, for example, it can review claim packages automatically to evaluate their complexity and route them accordingly, recover essential aspects of accident descriptions to support liability determination, and give suggestions based on the facts of the case, such as which injuries were incurred, what medical tests or treatments were applied, disambiguating between current prognosis and past medical history. Over­all, this accelerates the claims workflow and helps claims handlers focus on the highest value part of their work: decision making. And claims settlement speed is also regularly cited as a leading contributor to customer satisfaction.

A second area where Cognitive plays well is underwriting.

#2 Area : Accelerating Underwriting

  • Consistently grade risk & flag exposure
  • Accelerate quotes
  • Optimize risk engineers’ time

An essential part of underwriters’ jobs is to evaluate the risk profile of the custom­er they will be insuring. In Commercial Property Insurance for example, this in­volves analyzing third-party risk reports that describe the facilities to be insured, their particular risk factors and mitigators.

Cognitive technology quickly and consistently extracts each of these indicators and reports an overall, evidence-based, risk grade to the facilities. This means risk engineers can allocate more of their time to direct verification of the most com­plex cases and underwriters can turn around quotes on new policies faster, a key advantage in a competitive market.

When applied to the review of existing policies, cognitive can analyze clauses and compare them to reference policies to flag misalignments and excessive expo­sure. This means underwriters can more easily prioritize which clauses of a policy they may need to renegotiate in the future.

That’s it for today but in part 2 of this series, we’ll look at a third area where cognitive can help, as well as some ideas on how you can start building a business case for applying cognitive to your own business. If you don’t want to wait, you can also read the full white paper here right now.

* Data in this post based on NAIC Industry snapshot and FIO Insurance Annual Report 2017, both excellent resources.

Let’s discuss it ! My co-author Pamela Negosanti and I would love to know how you’d like to use Cognitive in your Insurance business – so please share your thoughts below or connect.


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