PROJECT REPORT

“THE IMPACT OF USE OF ARTIFICIAL INTELLIGENT (AI) IN

INSURANCE INDUSTRY”

SUBMITTE TO
Rashtrasant Tukdoji Maharaj Nagpur
University, Nagpur

In partial fulfilment of requirement of

BACHELOR OF BUSINESS ADMINISTRATION

Submitted by
DEVESH BALKOTE

Under the guidance of

Prof. Vijay Joshi

Supervised by
Dr Sujit Metre

SHRI BINZANI CITY COLLEGE, NAGPUR

2021-2022

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CERTIFICATE

This is to certify that Bhavik Patel is a bonafide student of Shree City Binzani City College, Nagpur pursuing
Bachelor of Business Administration (BBA) Session 2021-22

The candidate has worked under the supervision of Prof Vijay Joshi and has satisfactorily completed his project
work in this academic session. The project submitted by him is his own work and is complete so as to warrant its
presentation for examination.

His / Her project work titled “The Impact of Use of Artificial Intelligent (Ai) In Insurance Industry” which
is in partial fulfilment of the requirement for the above course is being forwarded to Rashtrasant Tukadoji
Maharaj Nagpur University for Semester VI examination.

Dr. Sujit Metre

Project Guide Principle

Prof Vijay Joshi Shri Binzani City College

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DECLARATION

I here-by declare that the project entitled “The impact of use of artificial intelligent (AI) in insurance

industry” has been completed by me in partial fulfilment of BACHELOR OF BUSINESS

ADMINISTRATION degree examination as prescribed by Rashtrasant Tukadoji Maharaj Nagpur

University, Nagpur and has not been submitted for any other examination and does not form the part of

any other course undergone by me.

Name of the Student: Devesh Balkote

Signature of the Student:

Place: Nagpur

Date:

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ACKNOWLEDGEMENT

With immense pride and sense of gratitude, I take this golden opportunity to express my sincere regards

to Dr Sujit Metre, Shree City Binzani College, Nagpur.

I am extremely thankful to my project guide Prof Vijay Joshi for her valuable guidance throughout the

project. I tender my sincere regards to him for giving me her outstanding guidance, suggestions and

invaluable encouragement which helped me in completion of the project.

I will fail in my duty if I do not thank the non-Teaching staff of the college for their Cooperation. I

would like to thank all those who helped me completing the project successfully.

Name of the Student: Devesh Balkote Signature of the Student

Place: NAGPUR

Date:

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TABLE OF CONTENT

S.no. Particular Page No.

1. Introduction to topic 6

2. Introduction to Industry 8

3. Rationale for the study 12

4. Objectives of study 16

5. Hypothesis 40

6. Scope of the Study 49

7. Limitation 54

8 Research methodology 56

9 Conclusion 57

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INTRODUCTION

Artificial intelligence (AI) is a technology which enables computer systems to accomplish tasks that
typically require a human's intelligent behavior. Examples include gathering information, analyzing
data by running a model, and making decisions. The use of AI has increased exponentially across all
industries. The rise in accessible data, increased computing capabilities, and changing consumer
expectations has led to a strong acceleration of AI development. We are now using AI throughout the
landscape of our lives-often without realizing it.

AI has the potential to affect the insurance industry in multiple ways. It is currently used in claims
processing, underwriting, fraud detection and customer service. For example, to improve customer
experience, many insurers are investing in virtual assistants like chatbots. Insurers currently
using chatbots include start-ups Lemonade, Geico, Allstate and Lincoln Financial. In addition, claims
management can be augmented using machine learning techniques in different stages of the claim
handling process. Machine learning models can help quickly assess the severity of damages and
predict the repair costs from historical data, sensors and images. Lemonade, for example, asserts that,
as early as 2016, its chatbot Jim settled a claim within 3 seconds. (Fujimaki, 2021)

Moreover, insurers are sitting on a treasure-trove of big data, the main ingredient AI requires to be
successful. The abundance unstructured data can be leveraged through AI to increase customer
engagement, create more personalized service and more meaningful marketing messages, sell the right
product to customers and target the right customer.

A 2021 PwC survey found that the most effective use of AI in insurance companies is in the customer
experience space while insurers top AI-related concern is the potential for cybersecurity breaches with
AI technology. Looking forward, AI will enable insurers to move from a "detect and repair"
framework to a "predict and prevent" framework, allowing insurers to help their customers manage
their risks and avoid claims altogether. (Fujimaki, 2021)

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Status: The insurance industry has only begun its venture into AI, with many traditional insurers'
experimenting with new ways to incorporate it into their day-to-day operations in anticipation of further
technological development. InsurTech start-ups are also utilizing AI to develop solutions to streamline
operations, create better underwriting models and enhance customer service. However, while AI
provides opportunities for traditional insurers to modernize themselves, implementing AI is not
straightforward. Traditional insurers could face challenges integrating AI into their existing technology
due to issues such as data quality, privacy and infrastructure compatibility

AI could save $390 billion in costs across insurers’ front, middle and back offices by 2030. This time
horizon seems far off but insurance companies that have already implemented advanced analytical
solutions are outperforming the competition today by 76%. (Schramm, 2021)

It’s not hard to see the impact of artificial intelligence on insurance already. Companies are using AI-
driven tools to do deeper, more thorough analysis of their data, and connect to customers in more
meaningful ways. The impact is especially noticeable in areas like customer support and retention. It’s
entirely possible to automate some parts of these features already, while still not restricting customers
in any way. In fact, the options available to the average customer nowadays are even greater than what
the market offered just a few years ago.

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INDUSTRY PROFILE

 Introduction:
Insurance is a contract, represented by a policy, in which an individual or entity receives financial
protection or reimbursement against losses from an insurance company. An entity which provides
insurance is known as insurer, an insurance company, an insurance carrier or an underwriter. A person
or entity who buys insurance is known as a policyholder, while a person or entity covered under the
policy is called insured.
The amount of money charged by the insurer to the policyholder for the coverage set forth in the
insurance policy is called the premium.

How does insurance work?

The concept of insurance works on the basis of ‘risk pooling’. When you buy any type of insurance
policy from the insurance company for a specified period with specific cover, you will make regular
payments (referred to as premiums) towards the policy. Similarly, Insurance Company collects
premium from all of its clients (referred to as insured) and pools the money collected to pay for losses
arising out of an insured event. In case the insured event takes place, and you make a claim, losses
will be compensated by the insurance company from the pool of policyholder’s premiums. In case you
don’t make a claim during the specified policy period, no benefits will be paid to you. However, there
are various types of products offered by insurance companies today which also involve savings
element attached to it.

Objective of Insurance
Following are some of the important benefits of insurance-
o Provides peace of mind
o Promotes risk control
o Promotes economic growth
o Distribution of risk
o Helps to get loan easily
o Provides tax benefit

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 Insurance Industry:
The insurance industry of India has 57 insurance companies 24 are in the life insurance business, while
34 are non-life insurers. Among the life insurers, Life Insurance Corporation (LIC) is the sole public
sector company. There are six public sector insurers in the non-life insurance segment. In addition to
these, there is a sole national re-insurer, namely General Insurance Corporation of India (GIC Re).
Other stakeholders in the Indian Insurance market include agents (individual and corporate), brokers,
surveyors and third-party administrators servicing health insurance claims

IRDAI

The Indian Insurance Sector is basically divided into two categories – Life Insurance and Non-life
Insurance. The Non-life Insurance sector is also termed as General Insurance. Both the Life Insurance
and the Non-life Insurance is governed by the IRDAI (Insurance Regulatory and Development
Authority of India).

The role of IRDA is to thoroughly monitor the entire insurance sector in India and also act like a
custodian of all the insurance consumer rights. This is the reason all the insurers have to abide by the
rules and regulations of the IRDAI.

Market Size
In India, the overall market size of the insurance sector is expected to US$ 280 billion in 2020. . India’s
insurance penetration was pegged at 4.2% in FY21, with life insurance penetration at 3.2% and non-life
insurance penetration at 1.0%. In terms of insurance density, India’s overall density stood at US$ 78 in
FY21. The life insurance industry is expected to increase at a CAGR of 5.3% between 2019 and 2023.
The insurance sector is a colossal one and is growing at a speedy rate of 15-20%. Together with
banking services, insurance services add about 7% to the country’s GDP. A well-developed and
evolved insurance sector is a boon for economic development as it provides long- term funds for
infrastructure development at the same time strengthening the risk-taking ability of the country. (IBEF,
2021).

According to S&P Global Market Intelligence data, India is the second-largest insurance technology
market in Asia-Pacific, accounting for 35% of the US$ 3.66 billion insurtech-focused venture
investments made in the country. (IBEF, 2021)
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Market share of Insurance company in India

India’s low insurance penetration, especially in the general insurance industry is not a new story. In
close to two decades, India’s insurance market has grown about 3%. To try and solve this issue, several
distribution channel-level propositions such as insurtech sandbox are being brought into the fray by
IRDAI to help the industry reach a larger population. The unprecedented rise of the internet and smart-
phone penetration in India over the last five years present both a challenge and an opportunity.

On one hand, the resulting avalanche of new data created, allows underwriters to understand their
customers more deeply – leading to new product categories, tailored pricing packages and real-time
service delivery. For example, small-ticket or bite-sized insurance products have shown improvements
in speeding operations after the success of sachet products in the FMCG sector. On the other hand,
ethical considerations for data privacy, misappropriation of data, and fraud detection of each customer

and extending simple yet valuable experiences continue to be a hot agenda.

RATIONAL OF THE STUDY

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The insurance sector is embracing new technologies to address some of its major customer pain points.
Leveraging artificial intelligence (AI) in insurance, NLP technology, Machine Learning (ML) helps to
tackle customer experience in health insurance and combat insurance fraud. Indeed, 87% of surveyed
insurers are already seeing their companies invest $5 million or more in AI technology each year.
Furthermore, corporate interest in insurance start-ups has led to some impressive fundraising. (Patel,
Snigdha, 2022)

Insurance AI means effectively implementing the advanced technology once the insurers figure out
where it fits into the digital insurance continuum. However, AI can be leveraged for insurance advice,
underwriting claims processing, fraud prevention, risk management, and direct marketing. 

Customer behaviour and advances in technology have opened the door for AI in the insurance market
to create value, reduce costs, increase efficiency and achieve higher customer satisfaction and trust

. 

AI has the potential to transform the insurance experience for customers from frustrating and
bureaucratic to something fast, on-demand, and more affordable. Tailor-made insurance products will
attract more customers at fairer prices. We will soon start to see more flexible insurance and
premiums that automatically adjust in response to accidents, customer health, etc. We will see
insurance become more personalized, because insurers using AI tech will be able to understand better
what their customers need. Insurers will be able to realize cost savings by speeding up workflows.
They will also discover new revenue streams as AI-driven analysis opens up new business and cross-
selling opportunities. Most importantly, the AI solutions described above can make it easier for
customers to interact with insurance companies. This could result in people being more likely to
purchase insurance.
Investments in artificial intelligence clearly payoff as McKinsey estimates that across functions and
use cases AI investments can drive up to a whopping $1.1 trillion in potential annual value for the
insurance industry. (Patel, Snigdha, 2022)
The benefits of implementing AI in insurance seem clear to stakeholders in this ecosystem. Indeed,
84% of surveyed French investors believe AI will revolutionize the insurance sector. Moreover, 66% of
insurers feel AI can help improve workforce productivity. (Patel, Snigdha, 2022)

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 By implementing AI into their processes, insurers can save time, reduce costs, improve customer
experience and increase profitability. 
 AI can also transform typically tedious and time-consuming processes i.e., underwriting, claims
management, fraud detection, customer service.
 With AI insurers can also reduce human errors. These errors can be common due to factors like
changing the regulation of information to analyse for fraud prevention.

This McKinsey study measures an organization’s digital maturity across 4 key dimensions.

These are strategy, culture, organization, and capabilities. The graph shows the insurance sector
behind retail and technology, but ahead of the global average.
Previous studies from McKinsey show the insurance sector lagging in digital transformation.  
But it moves up the rankings to overtake the banking and transport & logistics sectors to rate in
the top 5 in 2018.
The insurance industry’s digital maturity is progressing.
Various industry scores according to McKinsey’s Digital Quotient (out of 100)

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Why insurers are embracing AI

In the past, insurers struggled to develop ongoing, long-term customer engagement. This is mostly due
to a lack of interaction with policyholders.

 Creating a great customer experience relies heavily on communication. Insurers are

traditionally bad at communicating.

“More than 90 percent of insurers worldwide do not communicate with their customers even once a
year; 20 to 40 percent of their customer base will not receive a single communication all year.“
~ Oliver Börner, principal business solutions manager for global customer intelligence at SAS quoted
in CMS Wire

 Often, where there is communication, it is mostly for the wrong reasons.

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“The typical insurer’s customer communications are 90 to 99 percent sales-focused and 1 to 10 percent
service-focused, but the goal should be 70 percent of communications directed at serving the customer
and building trust and only 30 percent aimed at sales.” ~ quote from CMS Wire

 The problem is not a lack of data. In fact, insurers are sitting on a goldmine of information –
they just need the keys to unlock the value.

“Most insurance companies process only 10-15 percent of the data they have access to, most of which
is structured data they house in traditional databases. That means they are not only failing to unlock
value from their structured data, but also overlooking the valuable insights hidden in their
unstructured data.” ~ Accenture

Fortunately, new technologies are changing the relationship with policyholders, by enabling a
continuous cycle of interactions. This goes far beyond a claim’s submission or annual renewal notice.

AI improves customer communication through the analysis of data on hand – such as past behaviour,
demographics, psychographics and location – in order to decide the next message that is best suited to
each customer. AI technology assists in predicting user behaviour and determining which content,
based on that prediction, will most likely prompt the next best action by the user.

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OBJECTIVES

The objectives of the study are:

 To analyze which problems are being faced and how AI can solve it.

1) Efficient Customer Support Deliver

More and more insurance companies are investing in chatbots as an integral part of their customer
service to improve response time and save operational costs. 

As customer service bots resolve simple queries quickly, your team saves time to handle complex
queries and improve team productivity.
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By transforming customer service interactions, AI-powered digital solutions are prepared to improve
every aspect of your business including online customer experience, loyalty, brand reputation, and
generation of revenue streams.

From gathering data to speech recognition and message response times, AI can enhance the customer
experience in nearly every way when it’s applied correctly.

AI enables 24X7, always on, multi-channel customer service by deploying virtual agents (chatbots) and
personalized, interactive videos.

Here is how insurance in AI helps in delivering excellent customer service:

 Resolve Frequently Asked Questions (FAQs

 Learning Customer Behaviour Patterns
 Faster Response Times. 
 Utilizing Natural Language Understanding Claim Fraud Detection and Prevention

Artificial intelligence (AI) plays a key role in insurance scam detection by detecting false claims. As a
result, insurers can achieve an efficient and effective claims management system. 

Insurance AI algorithms can analyse huge amounts of data rapidly to find patterns and spot anomalies
that don’t fit the patterns.

From intelligent chatbots that offer 24×7 customer service to the range of machine learning
technologies that bolster processes through automation, AI is already being used in many ways. 

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With increased awareness and resources about the game-changing influence of AI in the insurance
industry, the initial hesitation and discomfort around its implementation are now minimal as there is
more emerging evidence of the benefits that AI can deliver.  

AI based insurance not only automates the scheduling of executive-level tasks but also enriches service
quality by helping agents make the right decisions and irrefutable judgments. 

Here is a look at some ways in which AI in insurance is making a difference in fraudulent claim
detection and prevention:

 Big fraud schemes: Deployment of AI for insurance, internal and external databases contain
data points that can be thoroughly cross-referenced and analysed. It is a great way to simplify
insurance fraud detection. 
 Fraud Patterns: Using AI in insurance for fraud detection would become much more
convenient. 
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For example, if a person claims that his smart phone is stolen, a search-run through databases can be
conducted to look for any previous suspicious activity. If any is detected, a red flag can be raised so that
an expert can dedicate more time to this claim.

2) Insurance Pricing and Underwriting

Underwriting is an essential part of the insurance through which insurers assess risk and determine
premiums to accept it. 

Evaluating and pricing risk requires extensive research on the risk profile of the customer.
Consequently, manual underwriting is time-consuming, prone to errors, and can lead to inefficient
pricing. It is why AI is the right fit for underwriting and risk pricing processes.

AI in insurance increases both efficiency and accuracy of the risk pricing process, creating competitive
advantages for insurers that use the technology.

56% of insurance executives believe that AI would improve operational efficiency.

From deep learning to RPA and chatbots, applications of artificial intelligence enable insurance
companies to conduct processes faster and more profitably. (Patel, Snigdha, 2022)

Here are the key ways AI in insurance improves underwriting?

 Efficient Application Processing: Insurance AI helps Underwriters can automate data collection,

data extraction, filling forms, or other repetitive tasks.

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 Better Risk Assessment: Using AI and ML models in insurance and other analytical techniques,
underwriters can deepen their understanding of the risk associated with customer profiles.
 Deliver Frictionless Customer Experience: With consumers expecting real time service across
all digital touchpoints, AI in insurance has the ability to drastically shorten underwriting
workflows.
 Improved Profitability: AI-based automation process improves underwriting profitability, while
reducing operational costs, customer churn, and costs for retaining customers. 

3) Accelerated Claims Processing 

In the digital age, customers expect on demand, real-time and efficient submission and processing of
claims. 

The insurers now offer new ways of submitting claims, for example through submissions on
smartphones or web portals. 

Insurance AI systems now assist customers with the submission of claims, by guiding them through the
claims process.  

For e.g., an AI-powered claims bot can review the claim, verify policy details and pass it through a
fraud detection algorithm before sending wire instructions to the insurance company to pay for the
claim settlement.

How AI in insurance help to streamline claim processing:

 AI-based chatbots can be implemented to improve the current status of claim processes run by
multiple employees. 
 Driven by Artificial Intelligence, touchless insurance claim processes can remove excessive
human intervention and can report the claim, capture damage, update the system, and
communicate with the customer all by itself.
 The document capture technologies and optical character recognition can efficiently capture
typed forms from the scanned documents.
 AI in insurance can now read the handwritten text at a level exceeding human capability. 
 Many parts of the claims process are also being successfully automated, from claims routing to
approvals. 

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It is how insurance companies make use of AI and such an effortless process will have clients filing
their claims hassle free.

4) Claims Reserve Optimization

Undoubtedly, insurance companies need to take a deep dive and embrace digital and AI technologies to
survive in today’s digital era.

Some of the top challenges in claims management are faced by insurers and the need to optimize their
claims operations are the inefficiencies in the claim’s registration process. The process is data-intensive
and repetitive, leading to operational inefficiencies. 

How AI based Insurance solutions help in claim reserve optimization

 Handling Claims Estimation in Real Time. 

 Early Detection of Fraud.
 Inspect Hazardous Locations. 

Some Other benefits are

Companies are embracing AI based insurance solutions to go the extra mile to stand out in the
competitive market. The goal for all insurers is to improve revenue and reduce cost. They need to adopt
innovative technologies and embrace the new ways of performing business.
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5) Personalized Recommendations

Customers have different needs, preferences and lifestyles. They expect personalized policies, loyalty
programs and recommendations, based on their individual preferences and attributes.

Engaged and satisfied customers are 80% more likely to renew their current policy. (Patel,
Snigdha, 2022)

Insurers are starting to provide tools that offer personalized insurance plans, based on Machine
Learning and Artificial Intelligence models trained on individual customer preferences. 

 
By deploying insurance chatbots, virtual assistants, you provide machine-generated insurance advice, to
ensure that customers have adequate cover and deliver an excellent experience.

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Voice bots can engage with customers and promote personalized offers. It will ensure that the
customers are retained on the platform and not acquired by the competitors. They also share
personalized recommendations and upsell other policies.

6) Prediction of Customer Churn

It is quite evident that the acquisition cost of new customers is substantially higher in the insurance
industry than in many other sectors. It is much less expensive to keep an existing customer than to
acquire a new one.

Insurance companies are utilizing AI based solutions for churn prediction to predict when customers
may churn, enabling them to take proactive measures to keep their clients. 

With the help of AI and Machine Learning algorithms, the leading indicators can be identified, such as
changes in utilization of apps and rewards programs, a change of frequency of interacting with
customer support, changes in income or changes in life circumstances.

The algorithms can also predict attrition in employees, by monitoring changes in work habits and
employee satisfaction.

Thus, it is a win-win formula for both insurance companies and customers.

 To analyze current use of AI in the industry.

Insurers around the world are turning to AI to cut costs, boost sales and improve service efficiency.
From helping predict customer needs to detecting fraud in real-time and predicting claims values, AI is
powering insurers all along the insurance value chain. 

According to the International Data Corporation, spending on cognitive and AI systems will reach
US$77.6 billion in 2022 with a significant amount of that investment directed to conversational AI
applications such as chatbots and deep learning and machine learning applications. These investments
are expected to save auto, property, life and health insurers almost US$1.3 billion while also reducing
the time to settle claims and improving customer loyalty.

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Newer AI applications are now taking hold on the sales and distribution side to drive lead generation,
automate targeted marketing, identification of sub-segment product profitability, support underwriting
through the use of big data and growing sales by supporting intermediary strategies through guidance
on agency business optimization, leads matching and customer propensity modelling. 

Insurers’ adoption of AI to drive sales is not coincidental. Increasing competition from born-on-the-
web insurers and insurance aggregators that do not rely on large, expensive agency distribution
channels are putting pressure on traditional insurers that do. In this environment, operationalizing AI to
drive sales is critical but it is an area that is still not well understood by many insurers. 

Insurers are data-rich organizations that have not necessarily used or made the most of that data in the
past, particularly when it comes to driving sales, supporting sales channels and providing insights to
intermediaries. 

This is changing thanks to two global trends: the increasing focus on the customer and the explosion of
data being collected. AI-powered customer journey mapping and understanding customer behaviour are
proving to be critical tools to creating positive customer experiences and to building data sets with
insights that are driving sales. For example, insurers are using advanced analytics and AI to derive
insights from customer profiles in order to re-engage inactive customers and upselling or cross-selling
to them.

KPMG has seen insurers typically adopt one of two approaches when introducing AI in their business:

1. focus on data, data collection and building up data warehouses / lakes before focusing
on the use cases;
2. focus on use cases first through identification of business outcomes and then work
back to the required data. 
The former approach assumes the CIO or CTO is the owner of the data and as a result, the AI adoption
journey can become a technology-driven exercise focused on data collection and management. This
also assumes that all data is equally valuable for the business. This approach has often resulted in less-
than-optimal results due to lack of buy-in from the business. 

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Those insurers who begin the AI journey with clear business priorities are enjoying greater success. 
Identifying the business priorities will allow insurers to more easily identify which of the growing
number of AI technologies is most appropriate and to pinpoint the data necessary to help them achieve
business objectives. 

Also critical to success is working closely with stakeholders in the business to develop use cases based
on desired business outcomes, such as using AI driven insights to support the achievement of key
business performance indicators. By starting with clear business objectives and involving the
stakeholders, who will benefit from the impact of introducing AI systems (i.e., the business people
leading sales and distribution, marketing, operations or claims), the journey has automatic buy-in and
the insights are relevant and immediately actionable. This is true regardless of where on the insurance
value chain AI is being applied.

For those insurers that have yet to start the AI journey, there is no time to waste. Competitors that have
adopted AI are already finding competitive advantages. 

Here are many examples of how insurers around the world are implementing AI to improve their bottom
line as well as the customer experience. There are also numerous start-ups that are providing AI
solutions for insurers and customers. I will cover a few interesting cases here.

Star Health and ICICI Lombard have deployed AI-ML solutions to make the cashless claims pre-
authorisation process for health policy holders instant. The entire process that used to take hours earlier
is being done in minutes now. “All the data, including the doctor diagnosis, the prescribed treatment
procedure, is taken by the AI system and is matched with the policy terms to deduce if the claim is
admissible. And if it is admissible, what is the amount to be authorised. All this is done in minutes,” says
Girish Nayak, chief of service, operations and technology at ICICI Lombard.

In motor insurance, if a policy is not renewed before the due date, a surveyor has to inspect the vehicle
to see it has not been damaged after the lapse of the policy. Depending on the availability of the
customer and the surveyor, the process takes between 24 and 72 hours. Now, Nayak says, customers
can take photographs of the vehicle and upload it on ICICI Lombard’s app, and if there is no damage,
the insurance can be issued immediately.
Edelweiss General Insurance says its remote survey app, BOLT, for motor insurance claims has seen a
rise in adoption in the last four to five months. “We are now seeing around 60% of remote claims being
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handled virtually through the BOLT app. This self-survey has also brought in convenience of spot
settlement,” the insurer’s spokesperson says.

Aegon Life Insurance recently added a Video Policy Doc feature on its app, offering customers a
personalised video that carries important information about the policy they just purchased. This not
only addressed customer concerns of not receiving physical policy documents during the lockdown but
also saved them the effort of going through a lengthy PDF to review critical information. “We use
AI/ML solutions to create videos on-the-fly, by embedding customer-specific policy Information and
generating the video link automatically, instead of producing each video separately,” says COO Naveen
Bachwani.

 To provide insights to increase insurance penetration in India.

The insurance industry in India has been growing dynamically, with total insurance premiums
increasing rapidly, as compared to global counterparts. The insurance penetration (ratio of total
premium to GDP (gross domestic product)) and density (ratio of total premium to population) stood at
3.69% and US$ 73, respectively for FY18 (fiscal year 2017-18), which is low in comparison with
global levels. These low penetration and density rates reveal the uninsured nature of large sections of
population in India, and the presence of an insurance gap. The sector has transitioned from being an
exclusive State monopoly to a competitive market, but public-sector insurers hold a greater share of the
insurance market even though they are fewer in number. Figure 1 shows the insurance penetration and
density in India from 2001 to 2017. (Bandyopadhyay, 2020)

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India’s insurance penetration and density: 2002-2021

The insurance sector has witnessed many changes over the years, including nationalisation of life and
non-life sectors (in 1956 and 1972, respectively), constitution of the Insurance Regulatory and
Development Authority of India (IRDAI) (in 1999), opening up of the sector to both private and foreign
players (in 2000), and increase in the foreign investment cap to 26% from 49% (in 2015). The recent
notification of 100% foreign direct investment (FDI) for insurance intermediaries (announced in the
Union Budget of 2019-20) has further liberalised the sector. (Bandyopadhyay, 2020)

Further, life insurance dominates the sector with a huge share of 74.7%, with non-life insurance
accounting for the remaining 25.3%. In the non-life insurance sector, motor, health, and crop insurance
segments are driving growth. India’s non-life insurance penetration is below 1%. In addition, insurance
products catering to speciality risks such as catastrophes and cyber security are at a nascent stage of
development in the country. (Bandyopadhyay, 2020)

Key challenges facing India’s insurance industry

The insurance sector faces various challenges, as identified and detailed in our recent research (Ray et
al. 2020). Low insurance penetration and density rates prevail in India. Rural participation of insurers

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remains deficient, and life insurers, especially private ones, gravitate towards the urban population, to
the detriment of the rural population.

Insurers in India lack sufficient capital, and their financial health, particularly that of the public-sector
insurers, is in a precarious state. Among the public-sector general insurers, the financial situation of the
ailing National Insurance Company is a cause for concern. Even though the Government of India has
already infused Rs. 25 billion in the three public-sector insurers – National Insurance, Oriental
Insurance, and United India Insurance – through the first batch of 'supplementary demands for
grants'1 for FY20, these insurers require an additional Rs. 100-120 billion in order to meet the stipulated
solvency margin. (Bandyopadhyay, 2020)

The general insurance industry recorded a decrease in profits, with public-sector general insurers
posting losses, and their private-sector counterparts recording a slight fall in profits in FY19, relative to
FY18. While premiums are still growing, the general insurance industry is experiencing underwriting
losses, which increased by 45.5% for general insurers in FY19 compared to the previous year (IRDAI,
2019). These might very well be early warning signals of the insurance sector succumbing to the same
malaise afflicting banks and NBFCs (non-banking financial companies) in India.

Further, there are concerns in the non-life insurance sector regarding product pricing and overcrowding
in some segments, along with issues in the crop insurance segment. To maintain profitability, insurance
companies are becoming increasingly dependent on their investment portfolio. They have also resorted
to harmful practices, for example, undercutting premiums. Other challenges, such as the predominance
of traditional distribution channels, also hinder the sector’s growth. Besides, insurers in India are
capital-starved. A possible additional effect of this low level of capital is incipient new risks, and
meagre capital makes it difficult for insurers to rise to the challenge of new risks. Risks associated with
the Covid-19 pandemic have recently surfaced, creating further challenges for insurers.

Way forward
In order to increase the penetration rates and density, uninsured rural areas and the urban poor must be
brought under the ambit of insurance coverage. Insurance companies in India will have to show long-
term commitment to the rural sector as well, and will have to design products which are suitable for
rural people. Insurance companies need to think about their distribution mechanism to work effectively
in rural markets. The focus of the insurance sector is steadily shifting towards increasing access of low-
cost, simple insurance products, including those that can be sold through online channels.
Simultaneously, a complementary thrust to spread awareness and improve financial literacy,
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particularly the concept of insurance, and its importance, can help. In this context, government
insurance schemes such as Pradhan Mantri Jan Arogya Yojana, Pradhan Mantri Fasal Bima
Yojana, Pradhan Mantri Suraksha Bima Yojana, and Pradhan Mantri Jeevan Jyoti Bima Yojana are
notable contributors in expanding insurance coverage among the population.

The merger of the three public sector general insurers, which has now been called off, could have
implications for the future of general insurance in India. The issue of low capital levels needs to be
addressed, and there is the related aspect of implementation of a risk-based capital framework.8 Prior to
that, the precarious state of public-sector general insurers’ finances should be tackled, and the new
regime should find the right mix between the growth of the insurance industry and safeguarding
policyholders’ interests.

 To study future use cases of AI in insurance

Technology is going to drive a fundamental change in insurance. This will be noticeable in

customer service and communication, but even more so its fundamental purpose. The
combination of AI-based tech and massive data is causing a seismic shift. This shift is
from repair or replace after the event, to predict and prevent before the event. Continuous
communication is vital to enhance engagement and build relationships.

Insurance has always focused on covering the cost after the fact. You pay a monthly premium
to cover your risk of something going wrong. Going forward, insurers will apply data analytics
to predict an incident and prevent it from happening. 

The technologies that will underpin this change are very dependent on data. They involve the
use of artificial intelligence and machine learning to get a deeper understanding of customers.
This will result in a better service and more relevant and timely offers.

Most AI applications are helping insurers increase efficiency and drive down costs—by automating
underwriting, customer service, and claims processing. AI is improving insurers’ operations and
business processes in:

 Customer experience: Chatbots and automated assistants cut costs and allow round-the-clock
customer service by automating responses to basic questions or handling simple complaints.

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 Claims management: AI can reduce the number of claims that require human analysis and
interaction, thus lowering costs and improving the customer experience by speeding up claims
resolution. 
 Fraud detection and prevention: AI technology is increasingly deployed to detect and prevent fraud,
which costs the industry an estimated $40 billion a year. 
 Talent evaluation: ML systems are improving the assessment and coaching of front-line staff, while
natural language processing systems are enabling better compliance and increased sales
effectiveness.

AI will transform the insurance sector in the future with new advances in deep learning and big
data analytics:

 Product innovations
 Increased operational automation
 Risk reduction

Intelligent automation drives the best ROI for repetitive, standardized, and attention-demanding
workflows. Claims management is a great example of such. 

Here's why— Largely paper-based and rarely end-to-end digitized, the claims management process can eat
up to 50%-80% of premiums’ revenues.

Being primarily manual, claims processing is also prone to errors and inefficiencies, which further drive up
the insurers’ operating costs. 

As McKinsey stated at the beginning of 2019, larger insurance carriers haven’t quite addressed the costs of
services delivery:

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In particular, the increase in connectivity — telematics and onboard computers in cars, smart home
assistants, fitness trackers, healthcare wearables, and other types of IoT devices — now allows insurers to
automatically collect more comprehensive data from customers.

They can then infuse it into their underwriting and claims management tasks to make both faster, more
agnostic, and less error-prone. 

More data equals better decision-making and reduced risks.

Yet at the same time, larger data volumes require more advanced (and secure) means for processing it.

That’s where artificial intelligence algorithms come to the fore.

Machine learning algorithms can effectively scan all the incoming data, interpret it instead of insurance
agents, and provide faster settlement to end-users.

 To analyze problems with the increasing use of AI in insurance

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Across the Insurance ecosystem, a special fraction within the industry is noteworthy for its adoption of
new technologies ahead of others. However slow but sure, uberization of insurance has conventionally
demonstrated a greater inclination towards digitization. Insurers now more than ever, need big data-
driven insights to assess risk, reduce claims, and create value for their customers. 
92% of the C-Level Executives are increasing their pace of investment in big data and AI.

–New Vantage Partners Executive Survey 2019 Artificial Intelligence has brought about revolutionary
benefits in the Insurance industry.AI enriched solutions can remove the ceiling caps on collaboration,
removes manual dependencies and report errors.

However, organizations today are facing a lot of challenges in reaping the actual benefits of AI.

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5 AI Implementation Challenges in Insurance

1) Lack of Quality training data

2) Clean vision, Process, and Support from Executive Leadership

3) Data in-silos

4) Technology & Vendor selection

5) People, Expertise and Technical competency

Some other problems which we can see

 Problems With Transparency

Car insurance works because the amount of money spent to pay for members’ occasional collisions is
smaller than the sum of the regular payments members make. But Schwarz said that’s a simplified view
of how insurance really works in the world — it doesn’t take into account the number of insurance
companies competing for customers, and all the buyers shopping around for the best coverage at the
best price. (Xu, 2021)
Companies jostle for the least risky customers so they can offer lower rates and therefore attract more
customers. As part of that, they charge different rates for buyers deemed to have different risk levels;
for car insurance, those who are more likely to have collisions and file claims will have higher
premiums. Insurance companies are allowed to charge customers differently based on different risk
factors, although many states have regulations on what factors companies can lo (Xu, 2021)ok at.
“Is that discriminatory? Well, it’s discriminatory in the sense that it’s discriminating on the basis of
your perceived risk — but that’s OK discrimination,” Schwarz said. “Insurance is built on
discrimination, but it’s built on discrimination that is permissible, and there are certain impermissible
types of discrimination. The question is, what is an insurer doing? And to what extent is its process
potentially producing the unfair type of discrimination?” (Xu, 2021)
Schwarcz laid out a hypothetical: If a traditional car insurance company found that low-income drivers
were more likely to make claims — for instance, due to not being able to afford fixing minor expenses
out-of-pocket — those companies may want to discriminate based on income, but they shouldn’t be
allowed to.

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“We don’t even know what ways the AI model is creating linkages between the input data and the
output predictions.”
“We say they still can’t,” Schwarz said. “At least that’s the norm — they shouldn’t be able to do that,
even if there’s more of a likelihood of a claim, because there’s a countervailing social interest in
making sure that people are not charged more who are least able to afford it.” (Xu, 2021)
But when risk models are built using AI, it may be much harder to pin down what insurance companies
are basing higher premiums on, he said. For instance, if companies use neural nets, an AI technique
that’s the basis for deep learning, the resulting model is basically an opaque box. Insurance companies
would know what factors were used to train their AI model, and using the models to evaluate new
customers would be as simple as feeding it the same types of inputs, but companies wouldn’t know
how the model internally related those factors to risk and which inputs are more important.
“If you’re using an AI, there’s no way of knowing how the AI is using that data,” Schwarcz said. “We
don’t even know what ways the AI model is creating linkages between the input data and the output
predictions.” (Xu, 2021)
As a result, AI insurance models may be harder to regulate than traditional insurance models, he said.
Regulators can request to see the guidelines traditional insurance companies use to determine risk and
ban companies from using factors that discriminate. But if insurers use an AI model, regulators who
gain access to the model would still end up with the same visibility into how rates are determined as the
insurance company itself — which could be no visibility. AI models could effectively make it harder to
hold insurance companies accountable for unfair discrimination.

 Beware of ‘Proxy’ Factors

And even if companies avoid training the AI model with personal data such as race or income, AI may
still incorporate those factors in its algorithm through “proxy” factors. For instance, if something like
the time of day when driving is taken into account to build a car insurance model, that could be a proxy
for income level, Schwarcz said. (Xu, 2021)

“If people who drive at a certain time of night are more likely to have claims, an insurer might say we
should charge them more,” Schwarcz said, continuing with his hypothetical. “But it may be that the
reason there’s a correlation is not because driving at that time is riskier, but because people with lower
income drive at the time of night, and people with lower income are more likely to make claims.”

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Basically, even if companies don’t provide data about factors like gender, race and income, the AI
could still find other factors that stand in for that data and have effectively the same outcome.
“We don’t want insurers to be using race. We don’t want insurers to be using income. We don’t want
insurers to be using gender,” Schwarcz said. “But if you have an AI that’s processing the type of data
you described, it’s going to end up creating linkages between the data it has and claims, in part because
of the correlation between that data and income.” (Xu, 2021)

It’s a balance going forward to develop AI’s benefits to insurance while finding solutions to its
challenges, especially around the potential to perpetuate harm on historically oppressed groups. Part of
that will involve standards and regulations catching up to the quickly changing industry, he said.
“AI raises all these difficult questions that insurance regulation hasn’t really figured out yet,” Schwarcz
said. “The future is really unclear. Right now, insurance regulation is really behind, both in
modernizing to allow AI where it’s beneficial, while at the same time safeguarding against some of
these risks.” (Xu, 2021)

 To analysis problems with the increasing use of Ai in insurance

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 Job Loss Problem

Job loss concerns related to Artificial Intelligence has been a subject of numerous business cases and
academic studies. As per an Oxford Study, more than 47% of American jobs will be under threat due to
automation by the mid-2030s. As per the World Economic Forum, Artificial Intelligence automation
will replace more than 75 million jobs by 2022. Some of the figures are even more daunting. As per
another Mckinsey report, AI-bases robots could replace 30% of the current global workforce. As per
the AI expert and Venture Capitalist Kai-Fu Lee, 40% of the world jobs will be replaced by AI-based
bots in the next 10-15 years. Low income and low skilled workers will be the worst hit by this change.
As the AI becomes smarter by the day even the High paid, High skill workers, become more vulnerable
to job losses as, given the high cost of skilled workers, the companies get better margins by automating
their work. However, these issues related to Job loss and wages can be addressed by focussing on the
following measures.

 Overhauling the education system and giving more focus on skills like Critical Thinking,
Creativity, and Innovation as these skills are hard to replicate.
 Increasing both public and private investment in developing human capital so that they are
better aligned with industry demand.
 Improving the condition of the labour market by bridging the demand-supply gap and giving
impetus to the gig economy.

Many insurance companies are interested in using AI as a way to reduce the money they spend on
staffing. But many customers still want to talk to a live agent when filing a claim or handling other
important issues. If the insurance industry moved to an AI-based workforce, that might eliminate
millions of jobs from the economy.

 Safety Problem

There has always been much furor about safety issues associated with Artificial Intelligence. When
experts like Elon Musk, Stephen Hawking, Bill Gates among various others express concern related to
AI safety we should pay heed to its safety issues. There have been various instances where Artificial
Intelligence has gone wrong when Twitter Chabot started spewing abusive and Pro-Nazi sentiments and
in other instance when Facebook AI bots started interacting with each other in a language no one else
would understand, ultimately leading to the project being shut down.

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There are grave concerns about Artificial Intelligence doing something harmful to humankind. The case
in point is autonomous weapons which can be programmed to kill other humans. There are also
imminent concerns with AI forming “Mind of their Own” and doesn’t value human life. If such
weapons are deployed, it will be very difficult to undo its repercussions. The following are the
measures that can be taken to mitigate these concerns.

 We need to have strong regulations especially when it comes to creation or experimentation of

Autonomous weapons
 Global Co-operation on issues concerning such kind of weapons is needed so as to ensure no
one gets involved in the rat race
 Complete transparency in the system where such technologies have experimented is essential to
ensure its safe usage

 Privacy issues

It is no secret that your personal data is likely available somewhere within the cloud, whether
companies are using it or not. However, many people are not comfortable with companies having
increased access to their data, even if it is used to provide more personalized experiences.

Despite these potential issues, nearly 80% of insurance executives think that AI will transform the way
insurance companies collect information and interact with their customers. According to McKinsey, a
global management consultant firm, AI implementations could increase productivity in insurance
processes and reduce operational expenses by up to 40% by 2030. However, more research needs to be
done to determine if insurance customers are keen on the arrival of AI.

 Trust Related Problem

As Artificial Intelligence algorithms become more powerful by the day, it also brings several trust-
related issues on its ability to make decisions that are fair and for the betterment of humankind. With AI
slowly reaching human-level cognitive abilities the trust issue becomes all the more significant. There
are several applications where AI operates as a black box. Example- in High-Frequency trading even
the Program developers don’t have a good understanding of the basis on which AI executed the trade.
Some more striking examples include Amazon AI-based algorithm for same-day delivery which was

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inadvertently biased against black neighbourhood, another example was Correctional Offender
Management Profiling for Alternative Sanctions (COMPAS) where the Artificial Intelligence
algorithm while profiling suspects was biased against the black community.

Following are few of the measures that can be taken to bridge trust-related issues in Artificial
Intelligence

 All the major Artificial Intelligence providers need to set up guiding rules and principles related
to trust and transparency in AI implementation. These principles need to be religiously followed
by all the stakeholders involved in Artificial Intelligence development and usage
 All the stakeholders should be aware of the bias which inherently comes with AI algorithm and
should have a robust bias detection mechanism and ways to handle it
 Awareness is another key factor that plays a major role in bridging the trust gap. The users
should be sensitized about the AI operations, its capabilities and even the shortfall that is
associated with Artificial Intelligence

 Computation Problem

Artificial Intelligence algorithm involves analysing the humongous amount of data that require an
immense amount of computational power. So far the problem was dealt with with the help of Cloud
Computing and Parallel Processing. However, as the amount of data increases and more complex deep
learning algorithm comes in the mainstream, the present-day computational power will not be enough
to cater to the complex requirement. We will need more storage and computational power which can
handle crunching exabytes and Zettabytes of data.

Quantum Computing can address the processing speed problem in the medium to long terms

Quantum computing which is based on concepts of Quantum theory might be the answer to solving
computation power challenges. Quantum computing is 100 Million times faster than a normal computer
we use at home. Although currently, it is in the research and experimental stage. As per an estimate by
different experts, we can see its mainstream implementation in the next 10-15 years.

The aforementioned problems are certainly not impossible to solve, however, it does require rapid
evolution in technology as well as human co-operation. While we are well on course in terms of rate of
technological advancement but we still have a long way to go to develop principles, methodology, and

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frameworks to ensure that powerful technology like AI is not misused or misapplied which may result
in unintended consequences.

HYPOTHESIS STATEMENT
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The study is based on the formulation of the following null hypotheses:

 The use of AI does influence the cost of insurance for Insurer as well as insured.

Like actuaries, the roles of underwriters will shift as insurance companies embrace data science and AI.
McKinsey predicts that up to 30% of underwriting roles could be automated by 2030, while another
30% will involve greater use of analytics tools and cooperation with data scientists. This makes the

upskilling of underwriters an imperative. 

S
ource: McKinsey & Company

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And just as data science and AI will enable more accurate risk prediction at scale, underwriters can
leverage these skills to better predict risk and write policies on an individual level—allowing them to
remain competitive on pricing without taking on undue risk. 

This shift is already apparent in the auto insurance industry. The combination of personal driving
histories and telemetric data from cars (everything from the miles driven to the car’s location) can
allow insurers to use AI to create precise quotes and offer rate adjustments based on ongoing
information flows. Thanks to big data and algorithms, insurers can provide instant quotes to customers
with lower risk profiles, allowing underwriters to focus on more nuanced cases.

Life insurance is another area ripe for disruption. Underwriters will continue integrating new data
sources, ranging from prescription medication data to pet ownership to credit scores. With access to
robust data analytics and AI in insurance, effective underwriting will require fewer invasive
requirements and more straightforward applications. 

Outside of insurance companies themselves, tech start-ups are offering insurers everything from
machine vision assessments of homes to risk assessments based on a wide variety of information
sources. 

Insurance pricing is a never-ending battle. With the advent of comparative raters in the P&C insurance
market, prospects can compare prices on many companies instantly, and, not surprisingly, they usually
choose the lowest offer. Inaccurate pricing is costly for insurance companies: it improves competitors’
customer base, reduces customer retention, and attracts risky customers. This is why actuaries spend
hours on fine-tuning pricing models.

Therefore, from the above analysis we conclude that the null hypothesis is possible

 The responses of clints with regards to the type of product and services offered by
the insurance company does influence the clints acceptance level towards insurance.

Consumer behaviour when it comes to insurance products is changing. In the past, insurance customers
accepted a delayed response. They were happy with a fair price and an acceptable level of service.

But here’s the kicker:

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Innovation in other industries has exposed consumers to a level of customer experience they now
expect across the board. They want personalized products and services. They want relevant, easy to
understand and contextual information. And they want services to be available at any time, via the
channel they choose.

Insurance customers want a customer experience similar to what they get from the best brands, across
any industry, such as:

o Cross-channel personalized experiences

o Seamless, consistent and connected journeys
o Accuracy, protection and privacy of personal data
o Interaction where, when and how they want
o Value exchanges above and beyond
o Real-time interactions and responses

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The power of gazillions of connected devices, producing massive amounts of information, will
drive active insurance products that are based on usage, behaviour and activities. Risk will be
assessed in real time; policies will be adjusted constantly and pricing will become highly
personalized.

 There is a significance relationship between using new technology and increased

customer service

AI is transforming the customer service experience across all industries. Insurance companies are no
exception. However, according to Customer Think, the insurance industry is not a forerunner in this
transformation. It lags behind other industries that have taken digital transformation by the horns. As of
2018, only 17% of insurers believed they effectively integrated AI and digital into their business
strategy, according to EY’s 2020 Global Insurance Outlook. (Kiesewetter, 2021)

Unlike other industries, the insurance industry must overcome a multitude of regulatory red tape and
potential disclosure of sensitive personal and financial data in order to adopt emerging technologies.
However, customer expectations have changed over the past few years, and this change has accelerated
throughout the pandemic. Insurers must understand changing customer needs and expectations,
especially as customers begin to no longer tolerate lengthy insurance applications or a convoluted
claims process. Integrating digital offerings, especially as it relates to AI and automation, into the
customer service model for insurance companies is critical to their success. Let’s look at some ways
that AI can transform customer experience for insurance companies. (Kiesewetter, 2021)

 Personalizing Sales

 Increasing the Efficiency of the Claims Process

 Managing Policies

 Generating Quotes

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EY Insurance Industry Outlook 2021 reports that:

 69% of customers now prefer to buy auto insurance online

 61% would also like to purchase health insurance online

 58% considers purchasing life insurance online

Therefore, from the above analysis we conclude that the null hypothesis is possible

 The technology of AI will improve over time and get more efficient.

Carriers will need to rethink their customer engagement and branding, product design, and core
earnings.  As these changes take root, profit pools will shift, new types and lines of products will
emerge, and how consumers interact with their insurers will change substantially. ~ McKinsey
Other industries are already investing heavily in AI. 
According to IDC, executives invested in AI systems to the tune of $24 billion in 2018 and are
predicted to spend more than $77 billion by 2022. ~  Source
The Digital Transformation Index published in 2018 by Dell and researched by Vason Bourne places
artificial intelligence as one of the top 4 investment areas to enable digital business, up from 8th
position in 2016.

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Technology Investment Plans Over the Next 1-3 Years

Source: Dell Technologies
As traditional laggards, insurance companies have had to spend much more than other industries to
catch up. A global trend study by Tata Consultancy Services in 2017, polled executives across 13
global industry sectors and found that “the insurance industry outspent the other twelve verticals
surveyed, investing an average of $124m on AI systems, compared with the cross-industry average of
$70m.”
In addition, research has found that “insurers who reinvent the customer experience and drive human-
machine collaboration are achieving returns in excess of 10 times their investment and could increase
industry-wide profitability by between $10.4 billion and $20.8 billion. The possibilities are endless for
insurers if they apply the right mindset!” (Sachdev, 2019)

AI’s underlying technologies are already being deployed in our businesses, homes, and vehicles, as
well as on our person. The disruption from COVID-19 changed the timelines for the adoption of AI by
significantly accelerating digitization for insurers. Virtually overnight, organizations had to adjust to
accommodate remote workforces, expand their digital capabilities to support distribution, and upgrade
their online channels. While most organizations likely didn't invest heavily in AI during the pandemic,

46
the increased emphasis on digital technologies and a greater willingness to embrace change will put
them in a better position to incorporate AI into their operations.

Four core technology trends, tightly coupled with (and sometimes enabled by) AI, will reshape the
insurance industry over the next decade.

 Explosion of data from connected devices

 Increased prevalence of physical robotics

 Open-source and data ecosystems

 Advances in cognitive technologies

Global Artificial Intelligence (AI) in Insurance Market, By Component (Hardware, Software, Services),
Technology (Machine Learning and Deep Learning, Natural Language Processing (NLP), Machine
Vision, Robotic Automation), Deployment Model (0n-Premises, Cloud), Application (Claims
Management, Risk Management and Compliance, Chatbots, Others), Sector (Life Insurance, Health
Insurance, Title Insurance, Auto Insurance, Others), Country (U.S., Canada, Mexico, Brazil, Argentina,
Rest of South America, Germany, Italy, U.K., France, Spain, Netherlands, Belgium, Switzerland,
Turkey, Russia, Rest of Europe, Japan, China, India, South Korea, Australia, Singapore, Malaysia,
Thailand, Indonesia, Philippines, Rest of Asia-Pacific, Saudi Arabia, U.A.E, South Africa, Egypt,
Israel, Rest of Middle East and Africa) Industry Trends and Forecast to 2028

47
The artificial intelligence (AI) in insurance market size is valued at USD 6.92 billion by 2028 and is
expected to grow at a compound annual growth rate of 24.05% in the forecast period of 2021 to 2028.
Data Bridge Market Research report on artificial intelligence (AI) in insurance provides analysis and
insights regarding the various factors expected to be prevalent throughout the forecasted period while
providing their impacts on the market’s growth.

Artificial intelligence will transfigure the insurance industry. AI technologies such as machine learning
and deep learning, machine vision, natural language processing (NLP) and robotic automation have the
potential to reimagine the complete insurance lifecycle from customer procurement to claims
processing.

The growing need to offer personalized insurance services have been directly influencing the growth of
artificial intelligence (AI) in insurance market over the forecast period of 2021 to 2028. Also the
increasing need to automate the operational process and rising volume and speed of data generation
with the adoption of IoT are also flourishing the growth of the artificial intelligence (AI) in insurance
market. Also the rapid increase in government initiatives supporting digitalization is also positively
impacting the growth of the market. Furthermore, the growing investments on advanced technologies
such as AI and IoT is also acting as an active growth driver towards the growth of the artificial
intelligence (AI) in insurance market. Moreover, the strong presence of highly skilled workforce in
enterprises and research and development capabilities, intended at developing AI technologies for
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enhancing the quality of the insurance process is creating a huge demand for artificial intelligence (AI)
in insurance as well as lifting the growth of the artificial intelligence (AI) in insurance market.

However, the lack of skilled employees as well as the various complexities in implementation are
acting as the major restrictions for the growth of artificial intelligence (AI) in insurance in the above
mentioned forecasted period, whereas the high risks related to data leaks and security breaches can
challenge the artificial intelligence (AI) in insurance market growth in the forecast period of 2021 to
2028.

Likewise, the rising adoption of IoT technologies along with rapid advancements in machine
learning and deep learning algorithms will further cater ample new opportunities that will lead to the
growth of the artificial intelligence (AI) in insurance market in the above mentioned forecasted period.

This artificial intelligence (AI) in insurance market report provides details of new recent developments,
trade regulations, import export analysis, production analysis, value chain optimization, market share,
impact of domestic and localized market players, analyses opportunities in terms of emerging revenue
pockets, changes in market regulations, strategic market growth analysis, market size, category market
growths, application niches and dominance, product approvals, product launches, geographic
expansions, technological innovations in the market. To gain more info on the artificial intelligence
(AI) in insurance market contact Data Bridge Market Research for an Analyst Brief, our team will help
you take an informed market decision to achieve market growth.

Therefore, from the above analysis we conclude that the null hypothesis is possible

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SCOPE OF THE STUDY

 AI in the Health Insurance Industry

Artificial intelligence is poised to become a transformational force in healthcare. AI health insurance

offers some advantages over traditional analytics and clinical decision-making techniques.  

AI in health insurance increases the ability for healthcare professionals to better understand the day-to-
day patterns and needs of the people they care for, and with that understanding, they can provide better
feedback, guidance, and support for staying healthy. 

Many companies deploy AI in healthcare insurance. 

Alayacare is a perfect case to the point for AI insurance Canada.

It offers a cloud-based software platform for home healthcare practitioners. The platform features
clinical documentation, back-office functionality, remote patient monitoring, & telehealth. It also helps
in analysing wearable devices to fetch patient data for processing through machine learning technology
by giving real-time insights for the care professionals.

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Key AI Use Cases in Health Insurance

 Faster Disease Detection

 More Accuracy in
 AI is a Great Symptom Checker.

 AI for Automobile Industry

The automotive industry is at the cusp of a phenomenal transformation. Automakers worldwide have
started incorporating advanced technologies in their products and operations to ensure that they stay a
step ahead of competitors in the market.

AI for motor insurance companies witnessed working its magic in an autonomous car using machine
learning and also automating motor insurance underwriting with AI.

Here is an example of the largest general insurance company in Australia, IAG deploys AI to assess
vehicle damage and reduce claim times.

The company uses an AI-based system to assess damage from motor vehicle accidents and speed up
customers’ insurance claims. The support team can predict whether a car is a total loss following an

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accident, and by mitigating the need to tow the vehicle to a garage for assessment, can reduce claims
processing times from weeks to days.

Key Use Cases for AI Auto Insurance 

 Predictive Analytics for Manufacturing

 Vehicle Maintenance Recommendations
 Driver Behaviour Analytics: 

 AI for Property Insurance Sector

AI-based technology is being applied to many different industries now, including the insurance
industry, with residential and commercial property insurance. It has the potential to transform how
property insurance works. 

Artificial Intelligence helps to improve the claims process, making it faster and more accurate than ever
before. Its ability to automate many tasks is making everything more efficient, which translates to better
customer service and outcomes.

Key Use Cases: AI for Property Insurance Companies

 Risk Analysis & Underwriting

 Fraud Detection
 Automated Claims Processing

 AI for Life Insurance Claims

The technology world is transforming rapidly, which is why the insurance sector is shifting with it,
driven by customer expectations. To be competitive, insurance companies require more customer
insights and the capability to turn these insights into action. 

AI in life insurance offers the chance to increase revenue, improve efficiency, and reduce risk. AI has
the ability to improve mortality, optimize decision-making to help build long lasting profitable
customer relationships. 

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Utilizing AI in life insurance underwriting can be determined along with individualized pricing, disease
severity prediction, submission prioritization, and rapid product development. 

Life Insurance AI Help Insurers in Following Ways

 Marketing & Sales

 Real time Engagement
 Mortality Reserving

 AI for Customer Communications

Insurers consider the changing customer needs and expectations, especially as they no longer tolerate
lengthy insurance applications or a convoluted claims process. Integrating AI and automation into the
customer communication model for insurance companies is critical.

With conversational AI enabling growth and disruption, insurers can address the demand for dynamic
products and capture a new customer base comprising younger demographics.

AI in customer communications in the insurance industry has done a lot to improve customer
experiences and operational efficiency. 

Here is how AI in customer communications deliver a transformative experience:

 Increased Efficiency of Claim Process

 Policy Management
 Generating Quotes

 AI for Commercial Insurance

Artificial Intelligence has the ability that allows programmers to create software that can identify
patterns, extrapolate predictions and manage information more quickly and efficiently.

AI can easily spot patterns and flag risks in commercial insurance. Both new and established insurance
companies are embracing artificial intelligence for these abilities.

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Here is how AI in Commercial Insurance is Vital

 Better Data-Driven Decision-Making

 Faster Process
 Risk Evaluation

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LIMITATIONS

Discrimination

One very clear danger is the problem of profiling – being judged a higher or lower insurance risk
because you belong to a particular demographic group.

AI can now differentiate risk into hundreds of factors. Algorithms scan these factors to identify clusters
of previously unrecognised risk. They can also deduce clusters on their own.

But these conclusions may unintentionally discriminate. There are already many examples where AI
algorithms have inadvertently amplified stereotypes.

The case of predictive policing in Durham, England, illustrates the problem. Police there developed an
algorithm to better predict the risk posed by people charged with an offence should they be granted
bail. What it did was discriminate against poorer people on the basis of where they lived.

Opportunistic pricing

There is also the prospect of more individualised discrimination.

Already quite well known is the problem of genetic discrimination – the risk of a health or life insurer
increasing premiums or even denying cover for certain conditions based on what your DNA reveals
about your genetic disposition to certain conditions.

AI opens up a whole new area of personalised discrimination, based on what it can glean from your
behaviours and preferences.

For one thing, the plethora of data potentially available to AI can tell an insurer a lot about your
spending habits. Where do you shop? What do you buy? When do you spend? Do you seek out
bargains or pay full price?

Knowing all this will help an insurance company estimate if it can get away with charging you top
price.

Some in the industry argue that this is just how markets operate, but when it is facilitated by
unprecedented access to personal information, it becomes a highly questionable practice.

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Loss of privacy

An insurer might also be tempted to use the data for purposes other than assessing risk. Given its value,
the data might be sold to third parties for various purposes to offset the cost of collecting it.
Advertisers, marketers, lobbyists and political parties are all insatiably hungry for detailed demographic
data.

Contrary to what people might think, this data is not the property of the person it relates to. It is owned
by whoever paid for it. Consumers must be legally protected against their data being used for other
purposes without their informed consent.

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RESEARCH METHODOLOGY

Research methodology is the specific procedures or techniques used to identify, select, process, and
analyse information about a topic. In a research paper, the methodology section allows the reader to
critically evaluate a study’s overall validity and reliability. The methodology section answers two main
questions: How was the data collected or generated? How was it analysed? 

 Research Design

The design of research is Descriptive in nature

Descriptive research design is a type of research design that aims to obtain information to systematically
describe a phenomenon, situation, or population. More specifically, it helps answer the what, when, where,
and how questions regarding the research problem, rather than the why. 

 Type of Data

Secondary has been used in this research

Secondary data refers to data that is collected by someone other than the primary user. Common
sources of secondary data for social science include censuses, information collected by government
departments, organizational records and data that was originally collected for other research purposes.
Primary data, by contrast, are collected by the investigator conducting the research.

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CONCLUSION

AI brings about a wave of uniformity across different market segments, industrial verticals, and service
providers. As a result, obtaining insurance and claims settlement procedures can be more standardized
throughout. Other benefits that we can anticipate would be greater operational excellence, lower costs,
and enhanced customer experience. Furthermore, there are certain downside such job loss, Privacy
issue, discrimination etc but clearly, the future of AI-driven insurance is a bright one, and the use of AI
in the insurance industry will see a massive boost in the coming future.

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