How Insurance Companies Can Use AI to Thrive

The era of artificial intelligence (AI) is here and is transforming the insurance industry. Will insurers pivot or perish? The answer lies in how they approach this big disruption.

Insurance industry executives need to understand that AI's strength is also its flaw. Not being constrained by rules allows for speedy learning, but it also means that AI is learning without the context that more specific programming or human intelligence and judgment would provide.

With greater computational and analytical capacity, AI can extend but not replace human cognition due to humans' ability to offer a more holistic, intuitive, context-specific approach to functional decision-making. At their core, AI systems are designed with the intention of augmenting, not completely replacing, human contributions. So automating certain industry functions needs to be approached more as an augmentation of employees' abilities in order to make them more effective in their roles.

Capitalizing on AI Requires Investing in Employees

According to research from Accenture in 2017 and 2018:

• 77% of insurance executives agree that AI is advancing faster than their organization's pace of adoption
• 68% of insurance executives say that their organization already utilizes AI in some capacity
• 55% of insurance executives cite better data analysis and insights as the benefits of investing in AI capabilities

Consequently, these investments in AI are automating traditional insurance functions such as claims processing, underwriting, fraud detection and customer service. Some carriers are also using AI to analyze competitor actions, customer trends and the detection of patterns to gain insights - all at a speed and accuracy seemingly impossible for humans to achieve.

However, due to these developments, many job functions in the insurance industry are at risk of being automated. For example, headcount associated with claims processing is predicted to be reduced by 70% to 90% in the next 10 years compared with 2018 levels.

Even though AI can reduce costs, improve efficiency, empower consumers and employees alike, failing to optimize AI in the right way can lead to premature organizational changes, loss of employee engagement and productivity, as well as consumer alienation.

So how can insurance executives ensure that their organization is capitalizing on this disruption and using AI to increase productivity and efficiency through their people and not despite their people?

According to recent research on AI's psychological impact on employees in the workplace: AI can have a positive effect on motivation among employees and managers who rely on it to carry out their duties at work. More specifically, the results indicate that AI can have a substantial positive influence on individuals' perceptions of autonomy, competence, connectedness and outlook for the future.

People leaders in insurance organizations that use AI applications can direct AI to perform the most time-consuming aspects of their employees' jobs and provide employees with more flexibility to decide where to focus their efforts. Employees in certain functions -- such as claims processing, underwriting, fraud detection and customer service -- can be redirected by their managers to offer more holistic, intuitive and context-specific expertise in those functions and use AI to enhance their capabilities to be even more effective in their roles.

These next-generation insurance professionals will be highly sought after and must have a unique mix of talent, skill and technological adeptness that will enable them to be successful in this semiautomated work environment that is continually evolving. Generating value from an AI-augmented workforce requires a conscious culture shift for most carriers today. Doing so demands an aggressive strategy to attract, develop, engage and retain this AI-augmented workforce in order to thrive in the era of AI.