Artificial intelligence technologies such as machine learning and data analytics could transform the claims value chain and improve customer outcomes
Up to $170 billion of insurance premiums could be at risk in the next five years due to poor claims experiences, with process inefficiencies in underwriting potentially costing the industry another $160 billion over the same period, according to a new report from Accenture (NYSE: ACN).
The report, “Why AI in Insurance Claims and Underwriting?”, is based on surveys of more than 6,700 policyholders across 25 countries; more than 120 claims executives in 12 countries; and more than 900 US-based underwriters. It explores how the insurance industry is responding to the latest market dynamics, pressure from new competitors, challenges facing underwriters, and the growing demand for seamless customer experiences — as well as how artificial intelligence (AI) technologies can be applied to satisfy and retain customers and transform the underwriting function.
The report found that one-third (31%) of the claimants were not fully satisfied with their home and auto insurance claims-handling experiences over the past two years. Of this 31%, six in 10 (60%) cited settlement speed issues and 45% cited issues with the closing process.
Dissatisfaction around the claims experience is a key reason driving customers to switch insurers. Nearly one-third (30%) of dissatisfied claimants said they had switched carriers in the past two years, and another 47% said they were considering doing so. Overall, the consumers who reported not being fully satisfied could represent up to $34 billion in premiums annually, or up to $170 billion over the next five years.
The report states that AI technologies could improve the claims process. For instance, four in five (79%) of the claims executives surveyed said they believe that automation, AI and data analytics based on machine learning can bring value across the entire claims value chain — from flagging fraudulent claims, to damage assessment and loss estimation, reserving, adjusting, processing optimization, and subrogation. However, the adoption of these technologies has been slow to date, with only about one-third (35%) of claims executives reporting that their organizations are advanced in their use of these technologies. This could change, though, as nearly two-thirds (65%) of insurance companies plan to invest $10 million or more in these technologies over the next three years, prioritizing AI-based applications and automation technologies, according to the claims executives surveyed.
The report also found that insurers could reduce underwriting operating costs through the adoption of AI technologies, making up to $160 billion in efficiency gains by 2027. As underwriters currently grapple with ageing systems and inefficient processes, the research found that up to 40% of their time is spent on non-core and administrative activities — an annual efficiency loss of between $17 billion and $32 billion. More than half (60%) of the underwriters surveyed believe that improvements could be made to the quality of their organizations’ processes and tools.
“AI is no longer a technology of the future, but an established capability that many insurance innovators are already putting to work to deliver better customer experiences and empower their workforce,” said Kenneth Saldanha, who leads Accenture’s Insurance industry group globally. “As humans and AI collaborate ever more closely in insurance, companies will be able to reshape how they operate, becoming more efficient, fluid and adaptive. Those that are already moving to leverage AI will be able to create sustained competitive advantage.”
Read the full report, “Why AI in Insurance Claims and Underwriting?” to understand how to drive AI at scale in insurance.
The report is based on four surveys across insurance claims and underwriting, analyzing both customer and employee experiences and how insurers are responding:
- A survey of 6,754 insurance policyholders in 25 countries on their most recent experiences in filing auto and property insurance claims;
- A survey of 128 insurance claims executives in 12 countries regarding the strategies of their claims organizations;
- A survey of 434 US-based property and casualty insurance underwriters, conducted in conjunction with The Institutes, a provider of insurance education; and
- A survey of 500 US-based life insurance underwriters regarding technology adoption.
To arrive at the $170 billion premiums-at-risk figure, Accenture used modelling in conjunction with survey data of 6,700 insurance claimants, analyzing the global personal auto and property insurance market to calculate the yearly premium volume and the percentage of people who make a claim annually. This was used in conjunction with the consumer survey data pertaining to the percentage of people who reported that they were not fully satisfied with their claims experience and those who said they have, as a result of their dissatisfaction, changed carriers or will do so over the next five years. Accenture used a similar approach to calculate the $160 billion efficiency gains in underwriting figure — taking into account personal, commercial and life yearly premium volumes and costs spent on underwriting employees to determine an underwriting expense ratio. Efficiency gains were calculated to be 0.5-1 percentage points of the expense ratio, representing between $9 billion and $15 billion globally per year.
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