Artificial intelligence (AI) is rapidly transforming industries across the globe, and the insurance sector is no exception. From underwriting to fraud detection, AI is streamlining processes and cutting costs and its impact has the potential to be particularly profound within the complex area of claims processing.
AI-driven claims handling can produce faster resolutions, reduced operational expenses, and improved customer satisfaction and is becoming more and more vital as the industry faces growing talent shortages. However legacy systems, outdated attitudes and misconceptions are holding many insurers back from making the most of AI. There is a clear opportunity here for legacy insurers to get ahead, especially at a time when more digital native insurers are entering the market, so how can they maximise this opportunity?
The Promise of AI in Insurance Claims Processing
The traditional insurance claims process is often slow, and can be frustrating for policyholders. Claims must pass through multiple stages and there are multiple sources that need to be reviewed and interpreted, making it a labour intensive process. AI is changing this by automating key aspects of the process, allowing insurers to assess and approve claims within minutes rather than weeks.
One of AI’s biggest strengths is its ability to analyse vast amounts of data quickly. By using machine learning models trained on historical claims, AI can determine the validity of a claim almost instantaneously. For instance,AI tools can utilise meta data in an image of a car crash to see where the crash was and check this against the claim information to see if they match up and if the claimant is covered in the UK. Natural language processing (NLP) can also analyse accident reports and medical records to verify injuries. These capabilities drastically reduce the need for manual intervention, making the process more efficient and cost-effective.
At the same time AI tools can improve the claims process for those working within the industry. In a piece of research we conducted last year, claims handlers themselves told us that technology would greatly improve their role. More than half (55%) of claims handlers surveyed said that reviewing and processing documents was the most tedious task for them – and 40% said it was data entry and updates. AI technology is designed to take on exactly these types of tasks acting as ‘the brain behind the scenes’ for claims handlers to enable them to focus more time on supporting complex cases or vulnerable customers.
Fraud Detection and Risk Mitigation
Insurance fraud is a major problem, costing the industry billions annually. Data from the Association of British Insurers at the end of last year revealed that £1.1 billion worth of fraudulent claims were detected in 2023, up 4% on 2022. While AI is on one hand helping to make fraudulent insurance claims documents more convincing and harder to detect, it is also proving to be a powerful tool in the fight against fraudulent claims – perhaps the only feasible option of a tool that can truly fight AI in this scenario is AI itself!
By analysing patterns and anomalies, AI can detect suspicious behaviour that may be missed by human adjusters. For example, machine learning algorithms can cross-reference claims with historical data to identify inconsistencies, while predictive analytics can flag high-risk claims for further review. Tools like ours can quickly look through fraud databases for historic claims, doing these checks instantly rather than claims handlers having to check multiple databases manually. AI can also check and establish whether documents provided as part of the claims process have been tampered with or modified in any way.
AI also minimises human bias in claims processing. Traditional methods may be influenced by adjusters’ subjective judgments, potentially leading to unfair claim denials or approvals. AI, by contrast, relies on objective data-driven assessments, ensuring greater consistency and accuracy in decision-making.
Building Trust With Customers
This ability to deliver greater consistency and accuracy in claims decision is key to building trust with customers, but there are also barriers created by misconceptions around AI that must be overcome. Far from operating as a ‘black box’ that many people perceive it as, AI technology can actually facilitate greater transparency in the claims process by enabling insurers to provide clear, data-backed decisions that help policyholders understand the reasoning behind claims decisions.
It’s also important to remember that AI technology such as Sprout.ai’s doesn’t actually change the claims handling process, it is integrated into the existing processes for insurance companies and is therefore based on the settlement philosophy that the insurer can set up themselves. As AI doesn’t define the process, it just supports with its delivery, there is also less likely to be the risk of human error or bias.
The other potential concern around the use of AI in insurance claims is the issue of privacy and data security, due to the vast amounts of personal data that AI tools rely on to function effectively. To build trust with consumers insurers must ensure robust oversight of AI, akin to the governance applied to human operations. This includes tight compliance with a wide variety of regulations such as the UK’s Consumer Duty, GDPR, and HIPAA in the United States, all of which mandate stringent customer care and data protection standards.
Enhancing Not Replacing Human Expertise
AI is undeniably revolutionizing insurance claims, offering speed, efficiency, and enhanced fraud detection. However, the key to accelerating successful adoption within the industry is recognising AI for what it truly is: a tool to supplement and support, not replace, people and expertise. Complex claims, such as those involving disputed liability or emotional distress, will always require human empathy and discretion—qualities that AI cannot replicate.
The ideal approach then is all about striking the right balance, leveraging AI tools in a responsible manner to increase efficiency whilst freeing up more time for human oversight and engagement where it is needed most. When this happens, insurance AI solutions will no longer be perceived as a threat that some see them as now but as an enabler of more high quality and consistent decisions and services, as well as a more positive work environment.
Insurance companies have the opportunity over the coming years to implement AI solutions in a way that brings benefits to all – employees, customers and businesses – so that this technology can help everyone to be better off.
