What to Know About AI Insurance Claims

AI has been used by many insurance companies in some form for a while, namely for things like chatbots. Recently, it has been implemented for more complex use cases, such as processing auto insurance claims.

AI is uniquely good at quickly processing and making sense of large amounts of data — infinitely faster than humans can. This comes in very handy for handling claims, as AI can check whether a claim is covered under a given policy, analyze photos that policyholders submit, and confirm a payout amount based on its knowledge about the damaged car make and model, as well as the average cost of repairs.

Taking Lemonade as an example again, it uses an AI bot to help guide policyholders through filing a claim. Then, its AI algorithms evaluate the claim and check for the possibility of fraud. If everything looks good, the AI can instantly approve and pay out the claim. For more complicated situations or if there’s information missing, the AI will transfer the claim to a human agent.

According to a survey by Solera Innovation, 34 percent of tech-savvy consumers have completed an auto claim without having to speak to a human¹. In addition, 79 percent would trust auto insurance claims powered entirely by AI. While we’re not quite there yet, it’s likely the direction we’re heading.

Leveraging AI for insurance claims processing benefits both the insurance provider and the consumer in several ways. Here are some of the main benefits:

• Faster Processing: The purpose of having insurance is to be ablea to get a payout for valid claims, which makes long and unclear processes incredibly frustrating. This is one of the big pain points that AI aims to solve, as it can very quickly assess photos and other claims data to help insurance staff process claims and payouts faster. And for straightforward claims, it can simply approve them and send a payout without going through a human agent at all.
• Freeing Up Staff Time: With AI taking over the initial filing process and approving certain claims without needing a person to intervene, human staff get time back to focus on other areas, like customer relationships and more complex claims. This ideally means that customers can expect a higher level of service and shorter wait times when they do need to speak to a person, since fewer claims overall make it to the human agents.
• Automated Updates: While a claim is in progress, AI can take a proactive approach and help keep policyholders up to date about its status via automatic notifications.
• Fraud Detection: AI algorithms are trained to detect instances where there is a high likelihood of insurance fraud, which takes a lot of time and work off the plate of human staff. When processing claims, AI can automatically take into account red flags like whether the customer has filed many claims in a short period of time or if a claim is being filed from an area that is known for high rates of fraud. If it detects enough red flags, it can make the determination to give the claim to a human agent to look into. Fraud detection is also a win for consumers because it helps insurance companies avoid large losses, which in turn helps keep rates affordable for policyholders.

While AI has numerous benefits, it’s not perfect. Like all technology, it requires some amount of oversight (at least for now), and there are ongoing concerns that companies that implement AI systems will have to grapple with.

The main concerns around AI relate to data, since data is what the algorithms are trained on and what their decisions are based on. The onus is on insurance companies to ensure that their training data is complete and accurate to reduce AI processing errors.

The nature of the training data also comes into play when addressing potential biases in AI systems, which can be an issue with AI².  If the training data is biased, which can even happen unintentionally, AI may then perpetuate these biases instead of removing them. For example, State Farm is being sued for racial bias in its fraud detection and claims processing algorithms for home insurance³. This is not an easy issue to solve and will continue to be part of regulatory conversations regarding AI, but it’s important for insurance companies to be vigilant and proactive where possible regarding potential bias in their AI systems.

With recent advances in AI technology, car insurance companies are leveraging it more and more to continue to improve their processes, helping to streamline their business operations, reduce risk, and ultimately provide an enhanced experience for customers. While many people may be wary of AI, it’s important to be aware of the changes taking place. While AI is not without its flaws, it offers many benefits to insurance companies and customers alike.