3 Ways AI is Transforming Property Insurance

Wondering about the impact of artificial intelligence (AI) in property insurance? In this post, we look at three ways AI is transforming insurance throughout the insurance value chain. 

Key Takeaways

• Thanks to digital-first brands like Netflix and Amazon, AI-enabled personalization is expected for every business—including P&C insurers
• Geospatial analytics, computer vision, and other forms of AI are increasingly used to quickly and accurately assess and price risk for truly fitted cover
• Combined with smart-home IoT devices, these same AI technologies enable  insurers to move from “repair and replace” to more proactive and preventative operating models. 
• By 2030, as much as half of all routine claims will be automatically processed and paid using AI
• However, only 39% of property insurers have, or are developing, a strategy against malicious AI used in claims fraud—including deep fakes 

Artificial Intelligence (AI) in Insurance

Artificial intelligence or AI is the ability for computers to do tasks and solve problems that would otherwise require human intelligence, faster and more efficiently.  In the insurance industry, AI is applied to accelerate processes and make use of an ever-expanding universe of data to offer personalized, proactive coverage.  

The AI revolution in insurance has gained urgency in recent years. Consumer adoption of digital channels for buying and managing insurance has pushed P&C insurers to quickly digitize more of their operations, a trend that only accelerated amid the COVID-19 pandemic. For digital-savvy insurance customers, the benchmark for success is no longer just other insurers. It’s Amazon, Google, and Netflix. 

Digital convenience? That’s just expected. Fast, friendly service? What else is new? For many insurers, artificial intelligence (AI) is changing the game by enabling them to offer far more personalized and proactive cover that not only helps insurers deal with risk, but also avoid it altogether. It’s also helping insurers navigate some of the costly downsides of modern technology. Let’s look at three of the most transformative impacts AI is having on P&C insurance today.

Underwriting Gets Personalized With AI 

Thanks to popular, digital-first brands, consumers want companies to reach out to them with recommendations based on their unique needs and make it effortlessly easy to act on those recommendations. Perhaps most of all, they prize tech-forward brands that can prevent or mitigate issues before they become costly problems. Today, AI is used to mine core systems and external data sources to profile existing and prospective customers in order to serve up highly personalized content, products, and services. 

Just as Amazon might suggest a new product of interest based on your profile and purchase history, AI enables insurers to send messages, for instance, to a customer or prospect about new auto policies when her son is approaching his 16th birthday. And it can automate this at scale, across the total universe of profiles. Meanwhile, chatbots leveraging neural networks can be developed to understand and answer most common customer questions in any mix of channels, including email, chat, text, or phone.  

Reassessing Risk

AI is also crucial to quickly and accurately price cover based on the associated risk and needs of the customers. This is essential for customers shopping for insurance online and for whom the first to respond with a good rate usually wins. It’s also business-critical to the insurer. Today’s cloud-connected insurance platforms make use of a wide range of data that is analyzed using AI to score risk and personalize cover in mere moments. 

In homeowner’s insurance, for instance, this can include crime statistics, past repair permits, previous claims, and more. It also includes geospatial property analytics that use high-res aerial photography, computer vision, and other forms of AI to instantly provide an accurate, up-to-date assessment of roof condition, fire risk, the presence of a backyard pool, or debris, or hundreds of other factors impacting risk and valuation. 

Our own solution, for instance, includes a Roof Condition Rating (RCR) that analyzes hundreds of different data points to provide an accurate assessment of roof condition. This can reduce the need for an inspection and the likelihood that the premium will need to be adjusted after the policy is already bound.

Meanwhile, mobile apps like FlyReel and Upptec enable customers to scan the interior of their homes using their smartphone’s camera, and AI will assess condition and document belongings, cross-referencing them with replacement costs to accurately price a policy.

Reinventing Operating Models

An expanding world of smart home sensors and other Internet of Things (IoT) devices mean AI is quickly enabling proactive cover that alerts the insurer and the homeowner to a break in, or fire, or a leak is detected in an upstairs bathroom. Put simply, AI is enabling insurers to move from “repair-and-replace” to more proactive and preventative operating models that deliver added value and save both the policyholder and insurer potentially large sums of money.  Devices that monitor for water leaks, for instance, could cut leak-related insurance losses up to 90% by 2025. 

Likewise, property condition intelligence can be used to lower rates for homeowners who take steps to mitigate wildfire risk by clearing brush and other vegetation away from their home, or address other perils that could lead to costly claims. 

Claims: AI at the Moment of Truth

When it comes to insurance, a claim is the ultimate moment of truth. Today’s policyholder expects a fast, frictionless, and transparent claims experience. Whether it’s through IoT or machine learning and other forms of AI, insurers are embracing technologies that enable them to proactively engage policyholders and optimize claims workflows to improve efficiency and enhance customer satisfaction. 

Smarter, Faster Claims

That sensor that detected a water leak in the upstairs bathroom? The AI driving that experience automates first notice of loss (FNOL) and proactively asks the policyholder if they’d like to submit a claim. And it’s handling a rising share of processes beyond that point. In fact, McKinsey projects that by 2030, as much as half of all routine claims may be resolved digitally. 

The same smartphone apps used to document and assign values to property assets can also be used to assess the damage done to them by fire, flood, tornados, and more. Solutions like PLNAR use AI and augmented reality to scan home interiors and reconstruct them in an ad hoc digital twin that places adjusters directly into the space, complete with accurate measurements and the estimated cost of repair. 

The Rewards of Loyalty

This means AI is able to automate the vast majority of low-severity property claims, while routing those that require expert judgment and empathy to human beings. Over time, AI is likely to harness the same data sources used to understand and price risk to verify more complex claims. Geospatial analytics-based property condition intelligence, for instance, can validate storm damage to roofs, or assess damage after a large-scale catastrophe. 

This is about more than just cost-savings. It’s also a long-term revenue generator. That’s because studies show customers who are happy with the claims process are 80% more likely to renew their policies—contributing to as much as 30% higher profitability for insurers. Those that aren’t are as much as 41% more likely to take their business elsewhere. And According to JD Powers’ 2021 US Property Claims Satisfaction Survey, insurers offering AI-enabled virtual claims reporting over the past year have seen the highest overall satisfaction scores ever measured in the study’s 14-year history.

Fraud: More Than Meets AI

As it stands now, insurance fraud costs US consumers more than $80 billion annually. This results in the average American family paying an extra $400 to $700 in premiums each year. 

AI is also crucial to fighting insurance fraud, both in underwriting and claims. An accurate, up-to-date understanding of property condition can also be useful in countering the kind of fraudulent claims and “free roof” scams afflicting insurers in Florida and elsewhere these days. Among other things, it can easily identify instances when a roof was not replaced after a claim. 

This is especially important given the rising use of images or videos that have been doctored or scraped off the Internet as part of claims scams—including deep fakes, which use AI to fool human beings. 

Today, there are a number of apps that can be exploited for claims that never occurred, or to document valuation of assets that don’t even exist. In a recent survey, only 39% of property insurers report either having, or are developing, a strategy to protect against deep fakes. In the case of deep fakes, AI will need to be leveraged to fight AI with solutions such as Attestiv, which uses machine learning and other technologies to authenticate digital media from any person or device—including deep fakes. 

This Is All Just The Beginning

New sources of data, and the ability to apply it through AI, will increasingly become a significant differentiating source of insight and value for property insurers. It’s this ability to launch new products and services that make the world more insurable, accelerate claims in ways the benefit insured at what can be a time of high stress, and improve fraud management in ways that lower the cost burden on families. 

In some ways, the AI revolution in property insurance puts new urgency attracting talent and the ability to leverage external, cloud-connected solutions instead of relying solely on internal development resources. In the $1.56 trillion P&C insurance market, the one who best harnesses the power of AI is very likely to win. 

To learn how AI-based property condition intelligence can help insurers select better risks, reduce expenses, and improve customer experience, visit our Geospatial Analytics page.