3 Ways AI Could Transform Your Insurance Policy

Your insurance company may know more about you than you realize.

The technology that saturates today's world — smart-home devices, drone images, fitness trackers, social media posts and telematics programs that monitor your driving habits — is helping insurers build a detailed picture of your behavior. Can.

Your permission is not always required. Many facts about your house, car, and neighborhood are public record. Data brokers also collect and sell details about your activity, such as which stores you visit, what you click on online and where your mobile phone is.

For a human being, all that data is too much to process. But artificial intelligence's ability to interpret data could impact the process of purchasing an insurance policy and filing a claim. Because insurers face questions about fairness and privacy, it may be harder for some people to get coverage. Others will benefit from affordable rates, quick applications and easy claims.

As insurance companies adopt AI, customers may see a shorter application process.

Peter Flynn, head of personal lines for the Americas at insurance consulting firm Exceedance, says insurers could drastically cut the number of questions asked in the home insurance application.

“In the future, they may only ask five questions,” says Flynn. “But they can collect 5,000 additional data points, and they can interpret those 5,000 things in addition to the five answers they get from the applicant.”

Chicago-based Kin Insurance, for example, collects thousands of data points and “prefills” home insurance applications with property details like square footage, foundation type and number of bathrooms.

a similar change is taking place life insurance underwriting, which traditionally requires a medical examination as well as a health and lifestyle questionnaire. As AI models improve, more carriers offer accelerated underwriting – issuing policies immediately to low-risk customers based on digital medical records and other data, while flagging high-risk applicants for traditional underwriting. We do.

“You can put in a little bit of information and they'll return a rate that's not based on someone coming to your house and taking blood,” says David Embree, CEO of online insurance broker Mylo.

To get the most accurate rate, make sure your records are accurate and up to date before you begin life insurance application, You may also want to have supporting documents — such as a summary from your doctor about any medical conditions — ready to go.

Low-risk customers stand to save money as insurers use data to create increasingly personalized profiles of their users.

The auto insurance industry is leading the charge telematics program Which monitors things like your speed, braking patterns and mileage, allowing insurers to set pricing based on driver behavior.

“In an AI-enabled or machine-learning-enabled environment, they can take it to infinite levels and gather as much data as is available and interpret it in real time,” Flynn says. Make predictions based on habits.

While less risk-averse buyers increasingly take advantage of better forecasting models, a 2020 report from the Organization for Economic Co-operation and Development warns of a potential downside to this approach. The OECD report said dividing customers into smaller risk pools could effectively exclude some applicants from insurance.

For drivers, the smart approach is compare car insurance Quotes from multiple companies. Not all insurers use the same sources of data, and they weigh each factor differently.

Filing an insurance claim can be a stressful experience. The use of AI by insurers can make the process easier for customers and get them a decision – and their payment – ​​more quickly.

According to a 2023 report from research firm Everest Group and professional services company Ernst & Young, AI will help insurers identify the most urgent claims, recreate accident scenes, analyze medical records and flag cases for signs of fraud. Can help to do. Making claims more efficient is a priority for more than half of property and casualty insurers surveyed, the report said.

New York-based insurer Lemonade says it's AI-based insurance fraud With detection, approximately 40% of its claims can be resolved in a matter of moments.

AI can also help prevent damage before the need for a claim arises – known as a “prediction and prevention” model, rather than the current “detect and repair” approach. For example, data relayed by smart-home devices could automatically trigger intervention if, say, a sensor catches early warning signs of a leak or frozen pipe.

AI can also provide feedback to drivers, helping them adjust their behavior. Programs like Allstate's DriveWise reward people who avoid risky habits like speeding, braking harshly or using a phone while driving.

But as the insurance industry integrates AI, there are concerns about cybersecurity, privacy, and the ability for AI models to discriminate based on characteristics like race or gender.

The National Association of Insurance Commissioners released guidelines in December 2023 encouraging insurers to correct errors and avoid bias in AI models. But each state makes its own rules, and regulation remains in its infancy.