AI IN THE

INSURANCE
INDUSTRY
26 REAL-WORLD
USE CASES

1
 TABLE OF CONTENTS

3 REDUCING FRAUD
4 INCREASING SETTLEMENT SPEED
4 BETTER STRATEGIC PLANNING
4 CREATE A MORE EFFICIENT TECHNOLOGY INFRASTRUCTURE
5 CUSTOMER INFORMATION AND RISK ASSESSMENT
5 BEHAVIOUR-BASED PRICING
6 CUSTOMIZED PLANS
6 IMPROVING THE DIGITAL EXPERIENCE
6 CHATBOTS AND CUSTOMER EXPERIENCE
7 SPEEDING UP THE UNDERWRITING PROCESS
7 AVOIDING HEALTH INSURANCE FINES
8 KEEPING UP WITH UPCOMING TECHNOLOGIES
8 FACIAL RECOGNITION
8 THE RISE OF INSURTECH COMPANIES
9 ENHANCED MARKETING EFFORTS
9 FIXING HEALTH CARE DATA FRAGMENTATION
10 IMPROVING HEALTH OUTCOMES
10 QUANTIFY CYBER RISK EXPOSURES
11 UNDERSTANDING HUMAN VOICE
11 NATURAL LANGUAGE PROCESSING
11 NATURAL LANGUAGE GENERATION
12 GAMIFICATION AND LIFE INSURANCE
12 DETECTING OBJECTS WITH COMPUTER VISION
13 PREDICTING EVENTSON A GLOBAL SCALE
13 BEHAVIORAL BIOMETRICS
13 CONTEXT TELEMATICS
14 CONCLUSION
14 SOURCES
The insurance industry is built around risk and the ability of the insurer to correctly
estimate and predict it. By collecting all the information available about an individual or
organization, an insurance company must make an accurate prediction in order to earn a
profit. If this prediction is not accurate enough, instead, the result would be a (potentially
huge) financial loss. It’s not surprising that the insurance industry always uses the most
innovative technologies to perfect its ability to assess customers and optimize their
products (i.e., their insurance plans).

AI is one of these technologies, and many insurance companies are already using it (or
plan to do so in the near future) to get an edge over the competition. AI can help insurers
in a lot of different ways, and it is going to be a must-have tech very soon. So let’s have a
look at what the future of insurance holds and how the innovation brought by AI can be
used to hit the mark even more precisely.

1 REDUCING FRAUD
No matter how precisely an insurer may have calculated risk,
scoundrels can always find a way to steal money from companies
by using fraud. With an estimated cost of $80 billion per year, fraud
accounts for 5-10 percent of claims costs for North American insurers.
Unsurprisingly, most insurance companies rate one of their key
priorities as upgrading analytics to detect fraud before a claim is paid. The problem is
that in such a hectic environment, no human analyst could even gather all the necessary
information about a policyholder in a timely enough fashion.

But what about a machine? An intelligent one can process an absurdly high amount of
apparently menial information to detect even the slightest hint that may indicate that
fraud is occurring. AI-powered identity verification services such as Shufti Pro, IDnow
or Jumio can also help establish the authenticity of a submitted claim by checking the
identity document, insurance card and other related documents. As the chance to detect
unlawful or mischievous behaviors increases, insurers may lower their premiums since
they do not need to account for these losses anymore.

3
2 INCREASING SETTLEMENT SPEED
The same reasoning described in the above point about reducing fraud
can be applied to all settlements, including the (many) legit ones. AI
can process enormous amounts of data in no time, speeding up the
entire insurance machine, and making the whole process of settling
a claim much more efficient. It can be so fast as to settle a claim in
less than 3 seconds, as Jim, the AI used by the insurer Lemonade, showed us in 2017.
Machine learning allows AI to grow better over time by learning from past mistakes,
further reducing the overall effort in the long term.

3 BETTER STRATEGIC PLANNING

Working in tandem with the immense potential brought by big data
technology in general, AI can draw a lot of insights and information
from data lakes and customer data. External data can be combined
with data coming from internal sources almost effortlessly for
strategic planning. Insurers could develop a perspective on areas in
which they want to invest before they do it, simulate real-world environments, and explore
new markets much more efficiently.

4  REATE A MORE EFFICIENT TECHNOLOGY

C
INFRASTRUCTURE
As I already explained in previous articles, machines tend to
“understand each other” better than humans do. Not every employee
possesses the right skills and mindset to understand advanced
analytics and leverage the full potential of data. AI can generate value
from insights coming from all kinds of technology in place, such as
sensors, IoT or electronic reports. Not every human can do the same, so companies need
many different specialists to understand every bit of information and then communicate

4
it to the other specialists. When humans need to talk to and understand each other,
integrating information, insights and technology becomes a chore. But if this same task is
done by software-based minds, it becomes much simpler.

5  USTOMER INFORMATION AND RISK

C
ASSESSMENT
Calculating risk is critical to estimate costs and determine the optimal
price of premiums. However, collecting all the necessary data to
make future predictions in the real world is complex, time-consuming
and requires significant resources. Instead of running discrete pilot
projects, AI can simply draw information from the constant flow of
data that it collects from consumers, and “filter” it out to make useful predictions. Real-
time information will provide a much clearer picture and a better risk assessment than
financial models built on statistical samplings of past performance.

With no need for any human resources except for a handful of AI experts and data
analysts, machines can consume enormous amounts of data to produce actionable
insights that can be used to have a clearer understanding of risk at a reduced cost.

6 BEHAVIOUR-BASED PRICING
Together with the implementation of sensors and IoT, AI can help
insurers draw a clearer picture of individual customers and their
behavior, to customize plans around them. For example, sensors
installed in a vehicle may be used to gather information on how the
insured drives – how quickly he accelerates and brakes, how frequently
he exceeds the speed limit, etcetera. This information could be used to comprehend that
user’s behavior, correctly assess the risk (such as how likely he is to cause an accident),
and provide him with unique premium discounts (or penalties) based on his performance.

5
7 CUSTOMIZED PLANS
Modern marketing is all about providing customers with highly
customized products which are tailored to fit their unique needs. Most
customers are more than willing to share their personal information to
receive a benefit in return – such as in the form of a plan with reduced
costs or increased coverage. Machine learning opens a plethora of
new possibilities – its notorious digital agility allows for a quicker integration of data
and variables to increase the individual value of the products offered to customers. Fully
customizable plans that take account of a customer’s budget, habits and lifestyle could
be presented with greater ease and flexibility as experimented with by the Italian company
Allianz1.

8 IMPROVING THE DIGITAL EXPERIENCE

To gain a competitive edge in the modern consumer marketplace,
a correct use of the newest technologies is key. However the
insurance industry is somewhat lagging behind, with just 15 percent
of customers satisfied with their digital experience. AI can provide
insurers with the much-needed tools to improve their customers’
digital experience, for example, in the form of intelligent robo-advisors. The immense
computing power of AI can help these robots provide useful advice by drawing info from
the otherwise inextricable cobweb of big data. Machine learning may also be instrumental
to make the conversations with these advisors less stiff over time.

9 CHATBOTS AND CUSTOMER EXPERIENCE

A chatbot may not sound or look like a real human… yet. But how many
leads actually need to talk with a real human during the first steps of
the initial communication? Chatbots can do wonders to reduce the
overall effort required by human employees, especially if they’re armed
with the ability to get better over time thanks to machine learning.

6
The cost of running online interactions between the company and its customers will be
dramatically decreased, increasing profits and giving ampler space to insurers to lower
the price of premiums.

10 S PEEDING UP THE UNDERWRITING PROCESS

The underwriting process is probably one of the inherent weaknesses
of insurance’s marketability. Jason Fisher, owner of BestLifeRates.
org, explained how “The most frustrating part of buying life insurance
isn’t actually finding what product you want most of the time, but
rather wading through the underwriting process. A good number of
people drop out just because of this very reason.” AI can make this very process so much
quicker, especially with all the numerous no-risk applicants. Their risk profile could be
evaluated against tens of thousands of previous applicants in a matter of seconds, so that
human underwriters can focus only on the most complicated cases that really need their
attention.

11 AVOIDING HEALTH INSURANCE FINES

In the United States, the health insurance market is as huge as
it is overly complicated. It is an impenetrable jungle of reporting
requirements, fragmented information, outdated records and
mishandled communications between patients, providers, regulators
and insurers. Finding the way in this labyrinth is anything but simple,
and it is not so infrequent that large insurers get fined for various insurance law violations,
such as the $2.5 million fine paid by UnitedHealthcare in 2018. AI may help streamline all
these processes and simplify all recordkeeping operations in real time, saving insurers
from any unwanted trouble and reducing the burden of administrative costs.

7
12 K EEPING UP WITH UPCOMING TECHNOLOGIES
New technologies are going to revolutionize the entire world – self-
driving cars are a prime example of the immense transformations that
we can foresee in our near future. A fully automated world requires a
different approach, and insurance is no different. For example, when
cars will be able to “make decisions” about driving, a completely new
way to determine who is at fault during an accident needs to be established. AI represents
a solution, since it will be able to integrate all the information coming from these highly
connected vehicles and all the technologies surrounding them (sensors, smart poles,
satellite views, smart roads, etc.).

13 FACIAL RECOGNITION
One way to increase customer onboarding is to provide them with
much quicker service. Instead of requiring long, expensive and
somewhat uncomfortable medical examinations, for example, the
startup life insurance company Lapetus allows enrollees to buy
insurance with just a selfie. Their technology uses AI-powered facial
recognition to rapidly assess a human’s lifespan and negative habits such as smoking
cigarettes, and assign risk scores in just a few seconds. And the best part is that facial
recognition technologies are still far from achieving their true potential, so this method is
likely to become even more accurate as time goes on.

14 THE RISE OF INSURTECH COMPANIES

Several insurance startups that base their entire business on cognitive
computing such as Fabric, Trov or GetSafe have already emerged.
These so-called insurtech companies use chatbots, AI-based claim
analysis, 2-minute signup processes, and mobile- and desktop-based
products. Needless to say, the growth of so many smaller players is

8
going to revolutionize the 300-year-old competitor landscape, forcing many of the older
players to reinvent themselves. AI can simply become a powerful force to drive marketing
efforts and show a brand’s continuous commitment to innovation and modernization.

15 ENHANCED MARKETING EFFORTS

AI can be used to improve a company’s marketing efforts in many
ways. Custom-built machine learning algorithms can be used to track
leads’ preferences, understand their needs and motivations, and
finely tune a business’ marketing strategies to its own customer pool.
Cognitive learning-based marketing platforms can be used to predict
and automate the selection of ideal audiences. The AI can use data to determine the user
persona of the “perfect buyer” and then target specific audiences with highly effective
personalized content.

16 F IXING HEALTH CARE DATA FRAGMENTATION

AI could be used to make sense of the enormous amount of
unstructured data surrounding medical reports and patients’
interactions with fragmented health care services. No insurance
company may track all the steps that a patient takes during a
treatment course – from the first doctor’s visit, to the subsequent
interactions with a specialist or an outpatient clinic. AI can unify all data coming from
multiple sources such as medical imaging results, lab tests and electronic medical
records, and analyze it to assess the patient’s level of risk. Risky behaviors such as lack
of patient compliance while taking prescriptions may be accounted for, and appropriate
measures taken such as intervening with nurse practitioners and social workers.

9
17 IMPROVING HEALTH OUTCOMES
AI could be used to fill gaps in care and improve health outcomes so
that the number of hospitalizations and emergency visits is reduced.
For example, the insurtech company Clover launched an AI-powered,
in-home primary care program that integrates genomic testing with
clinical support tools to improve the quality of life of enrollees. The
most vulnerable members receive uniquely tailored plans to reduce adverse events,
assist them with medication therapy management, and provide them with much-needed
preventive care advice. The expenses to deal with some vulnerable populations such
as patients affected by type-2 diabetes, for example, may become particularly hefty.
However, these costs could be cut significantly when these conditions are managed
appropriately, with obvious financial benefits for all parties involved.

18 QUANTIFY CYBER RISK EXPOSURES

Cyber risk is an elusive beast, and it’s very hard for the insurance
industry to properly assess it beforehand. The traditional actuarial
pricing models fail to provide a reliable overview of cyber risk
since no substantial loss history is available, and most information
provided by the insured is subjective at best. Even the most high-level
questionnaire on the security technologies in place provides only a sketchy picture that is
often insufficient to manage cyber underwriting. An insurtech company named Cyence
suggested an advanced AI model to address these issues. Their data-driven model can be
applied to measure risk by comparing a company posture to bad actor capabilities, and
accurately estimate its exposure to catastrophic cyberattacks.

10
19 UNDERSTANDING HUMAN VOICE
Some AIs are able to understand the human voice and recognize
words to transcribe them, as well as index and tag spoken words from
audio files. But some of the smartest ones can do more than just
transcribe a few short pieces of text, and can even detect emotions
and wellbeing from the intonation in the voice. One such example is
Beyond Verbal, a smart voice-detection software that can identify physiological markers
through the voice that spot many health-related issues. Interestingly enough, this software
crosses any language barrier. Information is gleaned from tones which come from the
limbic system and is therefore consistent across all languages.

20 NATURAL LANGUAGE PROCESSING

Natural language processing (NLP) is a technology that allows AI to
understand written texts and put them into context. In the insurance
world, the amount of text is always quite large – being it underwriting
processes, settlement claims or even just email exchanges. A
technology that “understands” all these texts from various sources and
can integrate them in a smooth and condensed way is undoubtedly useful. From pointing
to inconsistencies in claims to supporting quick reviews of third-party risk reports, the
potential uses of NLP are too many to count.

21 NATURAL LANGUAGE GENERATION

Natural language generation (NLG) is an AI-based tool that creates
credible texts. It is a branch of NLP that uses deep learning to interpret
text, learn from it and then create new content on the spot. It is so
popular that, according to Gartner, by 2020, 90 percent of modern BI
platforms will use it. NLG in insurance can be used for a variety of
different purposes – from helping marketers ease their advertising purposes with large

11
amounts of content written in real time, to quickly answering customer questions, or
providing instant feedback for usage-based insurance. Companies such as SafeDrive
have even used it provide textual feedback and driving tips as a part of a behavior change
support system for automobile drivers.

22 GAMIFICATION AND LIFE INSURANCE

Life insurance’s risk can be mitigated by enhancing and reimagining
the experience of enrollees. The startup Avibra uses a data science
model to mine customers’ data from their social media profiles, apps
such as Apple Health, Fitbit and Google Fit, as well as their credit card
and bank account to analyze their habits. Once it finds out more about
their positive or less ideal habits, it rewards them with free life bonuses on their insurance
coverage depending on their behavior. The idea is to leverage AI to bring a gamification
aspect to the life of the insured, shift their perspective towards life assurance, and
encourage them to focus on good habits. In other words, it helps life insurance maintain a
“good vibe” instead of concentrating on the mortality aspect.

23 D ETECTING OBJECTS WITH COMPUTER VISION

With 68 percent of car accidents are caused by distracted driving,
helping drivers focus on the road ahead is clearly a priority for all
insurers. Computer vision and AI can be merged together to detect
potential dangers on the road ahead as well as behaviors that signal
that the driver is distracted. This is the purpose of Nauto’s driving
systems, for example, which immediately warn the driver whenever an issue is detected
inside or outside the vehicle. On top of that, if a collision happens regardless, the software
may record the scene like an airplane black box, providing invaluable help during the
settlement phase.

12
24 PREDICTING EVENTS ON A GLOBAL SCALE
Some AI is so advanced that it is able to predict future events on a
global scale, such as climate-related risk (wildfires, flooding, storms)
on time frames of up to several decades in the future. These amazing
technologies such as the one invented by Jupiter use satellite and
sensor data for climate analysis to predict changing climate effects,
create reliable flood maps, and make other forecasts that could help insurance companies
assess catastrophic risk at an amazingly granular level.

25 BEHAVIORAL BIOMETRICS
As the insurance world shifts towards online experiences, fraud has
become “digital” as well. Legit customers’ accounts could be stolen, or
fraudulent accounts could be easily created with stolen data, starting
a vicious cycle of false claims and diverted payments that is extremely
hard to stop and even harder to detect. AI can use behavioral
biometrics techniques to analyze a user’s behavior – from creating an account page to
the time required to enter basic credentials – to spot bots and fraudsters by flagging any
suspicious behavior.

26 CONTEXT TELEMATICS
Contextualized telematics (CT) is different from standard telematics.
CT overlays traffic, terrain, weather, and handling of a cell phone while
in motion to provide a better understanding of driver behaviors. It
can be incredibly useful when paired with commercial fleets since
underwriters can “experience rate” fleets and adjust pricing according
to past data. As Andy Gastley - practice leader from A. G. Roth explained, “To the extent
a business owner can control claims through behavior monitoring and tracking, the
business owner can improve their claims – thus reduce their auto fleet insurance cost.
The CT is the best driver ‘babysitter’ a business can use.”

13
CONCLUSION
Machine learning-based technologies have already begun to affect the world of insurance
by making it more accessible and efficient than ever. AI in insurance is not a disruptive
technology – on the contrary, those who will adopt it as early as possible will be able to
provide their customers with innovative and streamlined products that will harness the full
potential that cognitive learning has to offer.

The impeccable logic and imperturbable reliability of machines can be used to calculate
any risk with absolute precision, reducing waste and making all products much more
affordable. Both consumers and insurers are going to enjoy the benefits of the widespread
implementation of this latest advancement of the era of digitalization.

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

https://www.modernhealthcare.com/article/20180726/NEWS/180729932

http://www.insurancefraud.org/statistics.htm#2

http://techgenix.com/ai-insurance-industry/

https://emerj.com/ai-sector-overviews/artificial-intelligence-in-insurance-trends/

https://www2.deloitte.com/de/de/pages/innovation/contents/artificial-intelligence-
insurance-industry.html

https://www.cbsnews.com/news/digital-disruption-is-rocking-the-insurance-world/

https://www.forbes.com/sites/blakemorgan/2018/05/16/heres-how-iot-will-impact-the-
insurance-claims-process/#6fac85ea366e

https://www.smh.com.au/money/super-and-retirement/a-selfie-could-become-the-new-
way-to-obtain-life-insurance-20170616-gwsl2m.html

14
https://www.the-digital-insurer.com/dia/allianz1-insurance-customisation-in-real-time/

https://www.prnewswire.com/news-releases/clover-health-launches-new-in-home-
primary-care-program-supported-by-genomic-testing-capabilities-300645346.html

https://www.guidewire.com/products/guidewire-cyence-risk-analytics

https://www.mobihealthnews.com/content/beyond-verbal-launches-research-platform-
leverage-health-detecting-voice-analytics-software

https://www.bestliferates.org/blog/2018-life-insurance-statistics-and-facts/

https://www.cmswire.com/digital-marketing/natural-language-generation-accelerates-
content-marketing-but-keep-your-hands-on-the-wheel/

https://www.gartner.com/doc/3611117/magic-quadrant-business-intelligence-analytics

https://www.researchgate.net/publication/323266830_SaferDrive_An_NLG-based_
behaviour_change_support_system_for_drivers

https://www.frugalforless.com/avibra-app-review/

https://www.nanalyze.com/2017/08/nauto-autonomous-driving-data/

https://findbiometrics.com/behavioral-biometrics-smart-bet-for-insurers-
biocatch-512055/

15