How AI will impact the future of claims

The InsurTech transformation, powered by artificial intelligence (AI), is underway. What this looks like in practice, and not just theory, is taking shape. The explosion of AI in the insurance industry has been written about at length, with thoughtful analysis and predictions providing a big-picture view of where the industry is headed. However, what does this shift look like in a real-world scenario? How will it change the policyholder’s experience and claim handler’s role? What will it mean for subrogation and for mitigating risks? To understand how AI will shape the landscape, let’s take a classic example of property damage.

AI in property claims

It’s 2:30 a.m. The Johnsons have just returned home from south Florida. Their mid-winter vacation was a relaxing, warm reprieve from the frigid northeast temperatures. When Mr. Johnson opens the door and flips on the lights to the kitchen, he’s met by one of the most dreaded situations a homeowner can face, especially at 2:30 in the morning, right after a vacation. There is an inch of pooled water in the kitchen. More is seeping out from somewhere near the wall by his dishwasher. Dark stains line the bottoms of their new solid wood cabinets. The floor is spongy. Months of labor and money the Johnsons poured into their recent home renovations have been washed away.

This situation is repeated thousands of times every year, across the country, in different types of properties. The details of the property damage change, but the resulting property insurance claim handling process hasn’t changed much.

Historically, claims are challenging not only for the policyholder but for carriers as well. It is an emotional process for the person making the claim — a loss, potentially a major loss, has occurred — and carriers want to make them whole again as quickly and easily as possible. However, insurance companies are often unable to deliver an exceptional experience today because the process is inefficient, expensive and time-consuming.

How AI can improve the claims process

Let’s imagine that Mr. Johnson opens up his carrier’s app on his smartphone. Instead of scheduling back and forth and waiting for a professional to perform an on-site evaluation, he’s guided through that process by a thoughtful AI assistant. The mobile phone-based AI assistant and computer vision scan Mr. Johnson’s room. The technology sees and documents the damage and asks relevant questions based on what it sees and doesn’t see — just like a professional would. As this happens, the data gathered flows into the insurers’ system. Most importantly for Mr. Johnson, it’s fast, easy and offers immediate stress relief.

For the carrier, the AI does the work of a professional without needing one on-site. AI watches the video scan, auto-extracts key details and information, and generates a report. It adapts or reacts based on things it sees or doesn’t see about certain items or conditions. It can ask for clarification when needed, such as getting a closer image of an item or capturing the manufacturer’s label on an appliance. When this AI-guided self-inspection is complete, thorough documentation and a report are available to the insurer, enabling faster claims decisions.

AI as a subrogation partner

Subrogation is a significant financial opportunity for carriers, and this new industry-specific AI allows them to pursue it quickly. Historically, carriers were forced to question everything causing significant expense or choose only what were considered obvious subrogation cases. In addition, there was no opportunity for consistency or accuracy because detailed investigations were not cost effective.

In the Johnsons’ kitchen, the AI gathers detailed information about the failure around the dishwasher during the self-inspection. Based on the characteristics of the failure and the components involved, the AI uses forensic knowledge and data to assess the subrogation potential, estimate the expenses for investigation and shipping and determine whether these metrics meet the carrier’s requirements to pursue subrogation. These predictive analytics can be a powerful tool for insurers to make consistent and accurate decisions. For claims handlers, it gives an efficient way to obtain subrogation claim referrals or documentation to close the files that have little chance of recovery.

The potential to eliminate claims

But what about the future of insurance? What if Mr. Johnson was able to avoid his late-night frustration and the claim altogether?

AI’s true power: it makes the insurance experience more proactive and valuable for policyholders. In addition to offering faster claims management and subrogation guidance, AI can help prevent losses.

Remember that dishwasher in Mr. Johnson’s kitchen? If he had done a similar, simple self-inspection during renewal or post-bind, the AI would have matched the risk relative to the components present in the kitchen, plus it would have made suggestions as to how the potential risks could be mitigated. Think of how grateful Mr. Johnson would have been if he had received a proactive warning of a recall or discount for a new dishwasher before he had to deal with water damage.

This application of AI can be a powerful ally in managing insurer’s risks, as well as an effective boost to the customer experience. By creating new relationships with policyholders, and understanding what’s in their homes earlier in the process, carriers have the potential to transform the claims experience — and maybe eliminate it altogether.

David Riggs (driggs@donan.com) is vice president of strategic initiatives for Donan. Laurie Kuhn (laurie@flyreel.co) is co-founder and COO of Flyreel.