Opinion: Robots transforming insurance efficiency


By David Loader

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The latest technological advancement representing a ‘game changer’ in financial services is the application of artificial intelligence (AI), particularly natural language processing (NLP). While these capabilities are not new, they are becoming more advanced and we are seeing some interesting developments in the life insurance space.

At its core, NLP is the ability of a computer to understand human speech or text and respond in an appropriate manner. While this technology has been used in financial services for more than a decade, the degree of sophistication and adoption is increasing rapidly.

In January this year, US-based general insurer GEICO released virtual personal assistant ‘Kate’, which uses a natural language processor to respond to questions from customers about policy coverage, billing information and insurance. Bravura Solutions’ innovation lab is also researching this area and has been testing the use of Facebook chat for customers to query policy information on the Sonata policy administration system as well as submit claim notifications.

Chatbots present significant opportunities for life insurers and their customers. Applications like Kate are able to instantaneously search vast document libraries and provide customers with immediate and highly accurate responses.

It’s not difficult to imagine how NLP could be employed by life insurers. With extensive libraries of product disclosure statements and policy documents for products spanning decades, it is virtually impossible for call centre staff to be familiar with all the policy terms.

Complex customer queries are typically referred for investigation and response by specialist staff, often involving delays and sometimes human error. NLP has the advantage of being able to instantaneously consider policy terms at granular level and identify all relevant terms applicable to a customer’s individual circumstances, even those hidden in small print.

Indian life companies are leading the way in using chatbots to enhance customer service and secure new business. In March, India’s HDFC Life launched a chatbot acting as a financial guide or virtual agent to help users choose the most suitable life insurance plans.

A number of life insurers in India have followed and are using bots for customer support.

NLP is also being used by life insurers to drive efficiencies, particularly in claims administration and management. While many insurers have employed underwriting and claims rules engines for some time, these capabilities have been restricted to structured data.

New NLP applications are going a step further, delivering life insurers the ability to analyse unstructured data such as complex financial documents and medical reports.

In January, Japan’s Fukoku Mutual Life spent $2.36 million to install the IBM Watson Explorer system to carry out tasks performed by claims adjusters. The system extracts data from scanned hospital records and medical certificates to determine claim payments, factoring in medical histories, injuries and procedures administered.

The new system led to staff reduction, with Fukoku saving $1.65 million a year in wages.

In March, Europe’s fifth biggest insurer, Zurich Insurance, introduced AI to handle personal injury claims, saving the company 40,000 work hours and reducing the time to review a medical report from an average of one hour to just five seconds. By eliminating the manual inspection of complex medical files, the AI system not only saved the company time, it also reduced claims leakage resulting from human error.

While the automation of manual tasks by AI and NLP capabilities is likely to result in staff reductions, human interaction in the life insurance industry will remain, with life insurers now able to reassign staff to areas better suited to their human capabilities, such as providing personalised one-on-one support during the claims process and providing an empathetic voice to discuss their claimants’ health issues.

Globally, the application of AI and NLP in life insurance is unfolding at a rapid pace. From an Australian perspective, it’s a matter of watch this space with local life companies already experimenting with AI and NLP.

Given a number of the global life companies pioneering the use of AI have Australian subsidiaries, the continued success of these strategies could see this technology rolled out in Australia in the near future.

David Loader is product manager for life insurance at Bravura Solutions

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