How Machine Learning Insurance Underwriting Can Reduce Industry Bias

Unleashing the Potential: Machine Learning Insurance Underwriting to Combat Industry Bias

Artificial Intelligence (AI) has evolved and has become one of the ways organizations use to streamline their operations. With AI, insurers can apply data modeling, machine learning insurance underwriting, and predictive analysis to the insurance value chain. The artificial intelligence market size in insurance is expected to reach $6.92 billion by 2028.

How Is AI Impacting the Insurance Industry?

The insurance industry has not been left behind in adopting technological advancements. Insurers are using AI in employee insurance benefits to engage with their audience effectively. Some of the benefits of AI include:

Improved Customer Experience

All customers want simplified information that adds value and is delivered on time. With AI chatbots, insurers can provide their employees with simple solutions to complex queries. Chatbots can now be used to sell policies and even identify customers' faces. AI also helps insurance companies to automate replies and save on processing costs.

Efficient Underwriting

When dealing with a large volume of data, insurers can use AI scores to get an accurate analysis. AI applications give underwriters time to focus on portfolio management and strategy instead of scrutinizing data manually. The AI algorithms can also handle underwriting tasks efficiently.

Reduce Fraud

Identifying theft has become common in the insurance industry. Insurance companies in the United States lose $40 billion every year to fraudsters. The figures are staggering since most insurers still rely on outdated systems that cannot detect fraud schemes. But AI can identify any gaps that make the process vulnerable to fraud. 

With machine learning insurance underwriting, it is possible to scan historical data and identify if something is wrong. AI can identify recurring patterns and make it possible to identify where there is potential fraud. Insurers can use an artificial intelligence fraud detection application to run automatic background checks on employees. Such a level of scrutiny is not possible with just the human eye.

Build Trust

Policyholders need a smooth claim process. The time it takes to settle claims is one of the metrics customers use when rating the performance of an insurance company. AI makes the process faster, enabling insurance companies to build trust.

How Is Artificial Intelligence Improving the Insurance Industry?

Insurance operations such as personalized insurance pricing, appeal processing, and fraud detection can be automated using artificial intelligence.

Claim Document Processing

One way to retain customers is by making their claim processing faster. Document processing is a repetitive task susceptible to errors, but document capture technology can handle large data volumes. Insurance companies can process documents faster, detect fraudulent claims, and save time.

Automated Repair Cost Estimation

Insurance companies can use AI to repair cost estimation. The artificial intelligence system can estimate repair costs and accident images in real time.

Application Processing

Application processing requires the extraction of a high volume of information. Extracting a huge volume of documents manually can increase the chance of errors and take a long time. However, document capture technologies allow insurers to extract the relevant data automatically and reduce errors in employee insurance benefits.

Appeals Processing

Once claims have been processed, the appeals can be automated using artificial intelligence. AI and machine learning insurance underwriting will lead to the automation of 50% of claims by 2025.

Insurance Pricing

About 42 billion IoT-connected devices like fitness trackers, cars, smartphones, home assistants, and smartwatches are expected to be used by 2025. It means that there will be a huge amount of consumer data. With such growing customer data, AI can help assess customer risk profiles. Insurance companies will accurately evaluate customer risk profiles and identify the appropriate price to quote for an insurance plan.

Document Creation

Insurance companies generate a lot of documents. Manually creating such documents takes time, and it's easy to make errors. When insurance companies use AI, they can generate policy statements without any mistakes.

Responding to Customer Queries

AI chatbots play a vital role in customer interaction. Responding to customer queries is tiresome, but chatbots can simplify the process. Employees can focus on other activities that add value to the organization.

Personalized Services

About 80 percent of customers need a more personalized experience and will disclose personal data in exchange. Insurance companies can use AI to clearly understand their customers and provide customized products. With customized products, customers can pay only for the coverage they need.

Bias in the Insurance Industry: How to Use Machine Learning to Remove It

Humans look at patterns to make sense of the world and decide on what they already know. Bias is a natural part of being human, but it can affect one's ability to make logical decisions. But machine learning insurance underwriting can filter irrelevancies in the decision-making process and provide an objective solution.

Artificial intelligence can eliminate the bias in underwriting through the use of a uniform formula to have individualized risk assessments. Technological advancements help organizations to improve customer experiences and reduce costs. AI can help remove bias in the employee insurance benefits in the following areas:

• Life disability
• Workers compensation
• Long term care

Insurance Claims Bias

The decisions that businesses make have an impact on their customer experience, profitability, and performance. In the insurance industry, such decisions are amplified by imperfect biases, especially in claims decisions and settlements.

Claims bias exists daily in the work that file handlers perform. Implicit biases cost the insurance industry millions. Recommendations made by lawyers in professional contexts also have an impact on settlements.

 Solving Bias Using AI

Removing discrimination from the claims handling process is important since claim outcomes and claimants can be prejudiced unintentionally. Factors like zip codes, income levels, and credit scores can discriminate against disadvantaged individuals and minorities. AI has been effective in recognizing ethnic and racial biases, and some systems also give users models, metrics, and algorithms for machine learning to remove biases.

 Artificial intelligence is one of the technologies that play a vital role in helping insurers streamline employee insurance benefits. It can track customer patterns, collect business insights, and make recommendations. As a result, going digital has become a priority for the insurance industry. 

Pilotbird uses AI-power analytics to provide insurance companies with innovative ways to engage with their customers. When you want to learn more about how Pilotbird applies machine learning insurance underwriting toward insurance challenges, request a demo.

References

https://www.databridgemarketresearch.com/reports/global-artificial-intelligence-ai-in-insurance-market#:~:text=Market%20Analysis%20and%20Insights%20%3A%20Global,period%20of%202021%20to%202028.

https://www.fbi.gov/stats-services/publications/insurance-fraud

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

https://www.weforum.org/agenda/2021/03/ai-is-fusing-with-the-internet-of-things-to-create-new-technology-innovations/