Millions in insurance premiums each year in Canada could be at risk due to poor claims experiences and process inefficiencies, but artificial intelligence (AI) technologies can mitigate these losses and create efficiencies that bring in more dollars, a new report found.
“In Canada, $811 million [in] premiums could be at risk per year, or $4.1 billion over five years, due to poor claims experiences and process inefficiencies. Fifty-six percent of this is attributable to motor insurance claims,” said Accenture in an email statement.
AI technologies such as machine learning and data analytics could transform the claims value chain and improve customer outcomes.
“With today’s rapidly maturing technologies and the ability to tap into ever-increasing data, AI has emerged as the transformative technology and critical differentiator in the insurance industry, especially when applied in tandem with humans,” said Paulo Salomao, managing director in Accenture’s financial services practice in Canada.
“What this could translate to in Canada is a potential efficiency gain of $786 million or $3.9 billion over five years.”
One third of claimants reported they were not fully satisfied with their most recent claims experience, research by Accenture found. The faster a claim is settled, the better the experience: only 17% of consumers were dissatisfied when their claims were settled in 48 hours or less, while 39% of consumers were dissatisfied when their claims took more than six months to settle.
What’s more, 40% of underwriters’ time is spent on non-core and administrative activities, representing an estimated efficiency loss between $85 billion and $160 billion over the next five years, Accenture found.
Incorporating AI into underwriting can help reduce time spent on administrative tasks and manual processes — in turn, speeding up the turn-around time with claims, but also opening up valuable time for underwriters to focus on other tasks.
The P&C industry’s aging workforce may also make AI valuable from an employment perspective.
Analysts predict 15.8% of the industry’s current workforce will retire between 2018 and 2022, equivalent to 3.2% in workforce attrition each year, according to the Insurance Institute of Canada.
Person-for-person replacement could prove challenging, but Accenture suggested AI solutions could help supplement the aging workforce.
However, AI is not without its risks: some code can “unintentionally produce decision results that propagate historic racial, gender, and other socioeconomic disparities,” Accenture wrote. But leading insurance companies can work to develop AI strategies that carefully adhere to ethics, regulations and responsible business practices.
Accenture concluded now is the time to adopt AI, especially as the economics surrounding it improve. AI costs have come down significantly over the past five years.
“Consider, for example, that the cost to train an [AI] image classifier like ResNet-50 on a public cloud platform dropped from approximately $1,000 to $10 between 2017 and 2019. AI investments can also be leveraged across insurance functions, creating gains across the value chain (e.g., claims, policy service and contact centers),” the report said.
“AI is no longer a technology of the future, but an established presence in our everyday lives,” added Salomao, “and many insurance innovators are already putting it to work to deliver better customer experiences and empower their workforces in parts of their businesses.”
Feature image by iStock.com/zhuyufang
