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Data and AI Are Driving Insurance Transformation

Insurance companies are investing in programs to improve underwriting, claims, fraud detection and the customer experience, and data is fueling it all. The future is bright, but to gain a competitive edge, insurers need to figure out how to leverage data successfully while avoiding potential pitfalls.

Insurers Are Investing in Data

The pandemic triggered a paradigm shift. According to Best’s Review1, the insurance industry started its digital conversion before the pandemic, but the pandemic forced insurance companies to fast-track those changes. There’s no going back. Now that the digital transformation race is on, insurers need to move fast if they want to stay ahead of the competition. Digital transformation efforts promise to improve the customer experience from the initial application for insurance, through the claims process, and all the way to payment, which can certainly help with retention. Digital tools can also improve underwriting and fraud detection, both of which can boost profitability.

There’s a lot of change happening, and data and artificial intelligence are at the heart of it all. Data is an extremely valuable organizational asset for carriers across the entire insurance value chain. Its acquisition and utilization is crucial to simplifying and improving the customer experience. The use of data prefill from internal and external sources alone can greatly accelerate processing time for policyholders.

For proof, just look at where insurers are putting their money. According to Deloitte’s 2022 Insurance Outlook Survey2, 74% of survey respondents are planning to increase investments in artificial intelligence in 2022. Additionally, 69% of respondents are planning to increase investments in data acquisition, and 67% are planning to increase investments in data analytics.

The Value of Data and AI

Insurers simply cannot deliver speed, simplicity and ease across channels without accurate and actionable data. At the 2021 Connected Claims conference, digital intelligence company ABBYY’s Solution Marketing Leader, Eileen Potter, stated, “Data is not static and the ability to extract intelligence and make knowledge-based decisions from customer data is a key competitive edge.” 3

Sue Unvarsky, Prudential’ s VP of Customer Service, echoed this message in her conference session. She discussed the importance of insurers having as much relevant customer data as possible before a triggering event. That way they can respond with empathy at the first touch and pay claims as quickly as possible without asking insureds for additional information. 4 Reiterating the value of data and AI, an IBM study revealed that insurers who increase AI use during the customer journey can show a significant increase in NPS and retention rate. 5

Leveraging High-Quality Data Is Key

According to McKinsey & Company, AI will create a seismic shift in the insurance industry over the next decade. By 20256, most employees will use data to optimize their work and smart workflows will be standard. By 20307, we can expect that customers will be able to purchase insurance more easily and quickly, usage-based insurance products will offer tailored coverage, underwriting will take place in a matter of seconds, and the majority of claims activities will be automated. For all of this to happen, we need data. More importantly, we need high-quality data.

Thanks to the rise of connected devices, insurers have access to new and growing sources of data. The fact that data exists, however, doesn’t automatically make it useful. For data to help the insurance industry achieve its goals, it needs to be accurate and meaningful.

Two Obstacles Must Be Addressed

Data’s potential is impressive, but two obstacles could hinder its progress. The first is data security and privacy; the second is bias in data.

Research from IBM8 shows that 42% of consumers do not fully trust their insurers. If policyholders don’t trust their insurers, they might not want to share their data, and this could make it more difficult to implement data-based programs.

Insurers need to show they can be trusted to keep consumer data safe, and many are working on ways to do this. Deloitte’s 2022 Insurance Outlook Survey2 found that 70% of respondents are planning to increase investments in data privacy in 2022.

Insurers will also have to comply with new data privacy regulations. According to the National Conference of State Legislatures9, data privacy has become an important legislative issue in recent years. In 2021, at least 38 states introduced data privacy laws, up from 30 states in 2020 and 25 states in 2019. Additionally, 13 states enacted consumer data privacy laws in 2021. This new legislation means that insurers have to navigate an increasingly complicated hodgepodge of state requirements.

In addition to data privacy concerns, insurers must also grapple with concerns over the fairness of AI-driven systems. Gartner10 has predicted that 85% of all AI projects will provide erroneous results because of bias in data, algorithms or the people who manage the data and algorithms.

States may pass new legislation to regulate AI in relation to the potential for bias, but the FTC has warned that biased AI programs could run afoul of several existing laws, including the FTC Act, the Fair Credit Reporting Act and the Equal Credit Opportunity Act.11

To help insurers navigate these issues, the NAIC12 has adopted a set of guiding principles for AI. In an article for Digital Insurance13, David Van Bruwaene, founder and CEO of FAIRLY, outlines steps to put responsible AI practices into action, including standardizing and automating documentation and reporting and adopting the model risk management three lines of defense framework.

Going Forward

Data can be extremely useful and harnessing new data to personalize policyholder experiences drives even more value for insurers. Artificial intelligence can be utilized to further leverage data to drive automation and simplification. As insurers become more dependent upon data, however, and increasingly use AI to automate, more preventive measures will need to be taken regarding bias in AI algorithms and scoring models that can lead to ethical questions, regulatory investigations and litigation. Deloitte’s survey found that only 24% of respondents were training AI and machine learning programs to identify algorithmic biases.2 Steps will need to be taken to mitigate compliance and reputational risks.

One Inc

Data and AI are transforming insurance. And so are digital payments. At One Inc we deliver the secure, frictionless, and personalized digital payment experience customers expect. With the strength of our next-generation technology, we provide carriers the ability to give their policyholders what they need and want: control, convenience, consistency, and continuity.

To discuss your digital payment needs, please call (822) 209-1688 or email inquiries@OneInc.com


1. https://news.ambest.com/articlecontent.aspx?refnum=306051
2. https://www2.deloitte.com/us/en/insights/industry/financial-services/financial-services-industry-outlooks/insurance-industry-outlook.html
3. Reuters Events, Connected Claims USA Post Event Report, Future Claims: Adaptable, Innovative and Inherently Good, Dec 2021.
4. Reuters Events, Connected Claims USA Post Event Report, Future Claims: Adaptable, Innovative and Inherently Good, Dec 2021.
5. https://www.ibm.com/thought-leadership/institute-business-value/report/insurance-cx
6. https://www.mckinsey.com/business-functions/mckinsey-analytics/our-insights/the-data-driven-enterprise-of-2025
7. https://www.mckinsey.com/industries/financial-services/our-insights/insurance-2030-the-impact-of-ai-on-the-future-of-insurance
8. https://www.ibm.com/thought-leadership/institute-business-value/report/insurance-cx
9. https://www.ncsl.org/research/telecommunications-and-information-technology/2021-consumer-data-privacy-legislation.aspx
10. https://www.gartner.com/en/newsroom/press-releases/2018-02-13-gartner-says-nearly-half-of-cios-are-planning-to-deploy-artificial-intelligence
11. https://www.ftc.gov/news-events/blogs/business-blog/2021/04/aiming-truth-fairness-equity-your-companys-use-ai
13. https://www.dig-in.com/opinion/strategies-for-insurers-to-grow-ai-responsibly

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The One Inc Content Team strives to provide valuable insights about digital trends and payments innovation for the insurance community.