In recent years, the perspectives of AI and blockchain in insurance have become more attractive. Regardless of industry, more corporate CEOs have started seeing numerous possibilities in these technologies to gain greater operations automation, processes facilitation, and competitive advantage excellence.
Both AI and blockchain have the power to revolutionalize traditional industries, and it’s common for key executives to examine these technologies with interest and fear.
At the same time, the zest of insurance companies in AI and blockchain is weaker than on average, comparing to other market sectors.
As Deloitte states, only 1.33% of insurance vendors actually bought AI tools; it’s more common for them to pay attention to the internet and software — the indicator here is 32%. When it comes to blockchain, the technology itself is mostly associated with decentralized finances, digital currencies, and the banking sector.
Nevertheless, it’s applied in insurance too: out of 200 blockchain solutions registered by McKinsey Panorama FinTech 20 were insurance-related. And their number is increasing with the growing interest and better understanding of these technologies.
In general, blockchain and AI still demonstrate relatively weak positions in insurance, comparing to the other industries. Due to these frequency lagging and additional implementation problems, we’ll show in which technologies you can invest today to gain an immediate competitive advantage.
What’s the Main Application of AI in Insurance
The ways AI improves the regular processes in insurance are numerous, but all of them are closely connected with data management.
In the current age of “datafication” of businesses and the growing power of Big Data, AI provides sophisticated yet intuitive tools for processing the information and drawing relevant insights. You can use them for your own good in many ways.
In the insurance sector, AI can help change the approach in data management from primitive data gathering to its effective processing.
For example, you can get working software to provide custom insurance packages to the clients based on the personal data collected during the entry surveys. It can advise car insurance based on the number and characteristics of clients’ automobiles. Or you can offer a particular health insurance package linked to the lifestyle specifics of each customer.
And all these advantages and personalization — without the need to spend time and human resources doing all the paperwork, linking a CRM software, learning your personnel how to work with it, and gathering the team of analysts to provide the insights.
AI can do everything by itself to give you concrete answers to the question “what to do with terabytes of data we’ve been collecting for years”. And an important next step: the technology can transform all these insights into repetitive tasks.
Just imagine how much time it saves you on doing some other important business tasks! That’s the competitive advantage essence of AI in insurance.
How Blockchain in Insurance is Applied
The short answer to the question “what is blockchain insurance?” is smarter financing. Its perspectives go far beyond money management and include higher customer engagement, better scaling, and effective digitalization.
In short, blockchain for insurance means the greater power of customer-controlled personalized data.
Thus, the main good the technology brings is to empower the traditional models with highly innovative and personalized solutions. In particular, you can manage records and process payments faster.
Another set of advantages includes better budget management, risk mitigation, improvements in customer service, and building mutual trust in communication with key stakeholders.
In practice, blockchain provides insurers with the effective tools to prevent frauds, simplify the application process, improve directory accuracy, and create records with full customer profiles.
Top 5 AI Insurance Examples
Here’s the list of key AI insurance services and innovations you can invest in these days to gain a competitive advantage in the market.
AI in Auto Insurance
In the automotive industry, an AI insurance company can offer a customized approach. As a special service, you can adapt your current process and prepare to switch to self-driving cars in the near future — as the Coronavirus global lockdown in 2020 showed, it’s important to be ready to implement new working models immediately.
In general, AI technology can assist in getting new revenue streams and being in touch with your clients through chatbots and customized communication templates.
AI in Life Insurance
When it comes to your personal life, AI can provide relevant insights with automated input management. This tool collects information about clients’ previous life events, along with their frequency, to offer personalized services and packages that really matter.
AI in Insurance Startups
InsurTech is a highly prospective direction of AI insurance development. Small firms like Clover, Fabric, GetSafe, and Trov offer selective software services on a decent level to cover the growing interest of insurance executives in the technology.
Among the solutions offered, you can request claims-handling chatbots, smart consulting on insurance packages, and quotes generation.
AI insurance can help in attracting new clients and turning them into sales appointments. The software can scan social media, forums, and email databases to search for potential leads and offer them insurance services.
What’s more, the intelligence component in the technology can reveal itself in making a highly personalized message with the pre-designed template.
For example, it can offer travel insurance to a person who announced on Facebook he’s about to visit a foreign country. All the processes will happen automatically.
AI can prevent severe fraud-connected problems in insurance companies. In this case, the technology will investigate the possible factors and threats while handling claims to get an objective picture of the previous events.
If a person claims he became a victim of an earthquake somewhere in Mexico, AI will scan the news from this country to check whether an earthquake actually took place and who were the victims according to the hospital reports.
This way, investing in AI technology will save money on paying investigators and covering frauds.
Blockchain in Insurance: Use Cases
Blockchain and insurance together create several interesting examples. Here are the exact things insurance blockchain startups can do.
Blockchain in Life Insurance
Like AI, blockchain can facilitate dealing with life insurance. In the case of this technology, its main strength is providing extra cost-effectiveness.
Smart contracts effectively track and deal with insurance on the micro-level, thanks to its regulated decentralization principle. As another dimension, the devices from the Internet of Things (IoT) world can assist insurers in tracking threats and preventing frauds.
One of the main problems at the stage of data collection is the unwillingness of clients to give sensitive answers to insurance agents. Blockchain can assist you here.
By guaranteeing higher protection and greater control over personal data, the technology encourages clients of insurance companies to share their information freely. You can request it as Know-Your-Customer (KYC) data service, where clients not only share identity information on a smart contract basis but also re-use it for faster and safer verification in other companies.
Blockchain in Auto Insurance
The technology can bring the payouts on auto insurance to the next level. For example, in the case of a car accident, both sides will get the necessary information to build trust: a client will get an immediate payout, while the insurer will see that the car is repaired by a licensed service provider.
In contrast to traditional models, blockchain can do it faster and through a credible network, which significantly increases speed and customer satisfaction.
P2P Insurance Operations
Smart contracts can increase customer satisfaction with insurance services when it comes to immediate payouts and claims handling. This use case is implemented by P2P flight insurance from InsureETH.
The startup offers software that scans flight information from verified sources and provides automated insurance coverage for a delayed or canceled flight.
This way, the insurance company and the client can save time and nerves during appointments and handling extra paperwork to get compensation.
Blockchain can save insurers money on various stages of the working process: while identity verification, checking contract terms, reporting claims, and collecting data from third parties.
In this context, it can cover the tasks normally handled by several executives in a firm and reduce the negative effect of a possible human mistake to a minimum.
Main Challenges of AI and Blockchain in Insurance
In practice, AI and blockchain complement each other: while blockchain offers advanced tools to gather information, AI can process and analyze it effectively. Nevertheless, many companies face severe implementation problems while trying to apply them both simultaneously.
In theory, the technologies sound like a brilliant idea — but it’s not easy to apply them smartly. Thus, first and foremost, it’s important to find a reliable vendor who can introduce AI and blockchain skillfully.
AI Limitations and Implementation Problems
To work in a satisfactory manner, AI needs lots of data. If your insurance company is not accustomed to collecting masses of information from clients, AI tools will have nothing to analyze and provide insights from.
In this context, it’s important that all this data is closely linked to both organizational and customer needs, meaning that information should be both relevant to insurance company activity and be about your client.
If you offer life insurance, it’s important to clarify all the risky things your client does. But checking the breakfast preferences is not a relevant question in the survey.
Blockchain Limitations and Implementation Problems
Blockchain needs certain pre-defined conditions too. Like AI, blockchain reveals its best in complicated transactions that involve numerous parties and complex reporting.
If your insurance company relies on direct transactions and has a trusted intermediary you’re totally satisfied with, you don’t need this technology. Moreover, blockchain can bring you problems in terms of scalability, safety, and standardization.
In particular, it’s not recommended to implement it for all your financial operations at once — as its consensus-based validation is not adapted yet to fast growth.
Besides, specific cyberattacks and the need to develop standards from scratch also call for taking a wise approach and switch to blockchain step-by-step and at a moderate pace.
Insurance Industry Limitations and Implementation Problems
In addition to technological complexity, the insurance industry itself is not totally ready to switch to AI and blockchain. Here, the main problems refer to data collection, the power of traditional approaches, and prejudices towards new “unknown” technologies.
Considering the essential need for cooperation during the early implementation stage, these factors can become a severe obstacle and the main reason for failure.
Among the stakeholders whose involvement is critical, consider C-level executives, tech startups, regulators, and customers. To facilitate the process, attract a software development consultant from a reputable company.
How to Implement Blockchain and AI in Insurance
If you need consultation on the need and perspectives to implement AI and blockchain in your business, feel free to contact us! We, at Intellectsoft, can recommend and build for you the requested solution and offer a wide range of extra custom insurance software development services.
You can choose the one you need by yourself or after talking to our consultant. Contact our experts and find out more about AI and blockchain technology in insurance and how your insurance company can start benefiting from them today!