A 2019 PwC survey of 3,200 CEOs over 90 territories resulted in a remarkable finding - many players in the insurance industry have gained significant optimism in the use of technological opportunities to drive organic growth and operational efficiency. A standout technology has been the use of artificial intelligence (AI) to increase firm productivity and produce predictive power. In this article, we will identify several factors that have contributed to this shift in attitude towards technologies like AI in claims management.

The tipping point for many innovations results from the level of maturity of underlying technologies. For claims management innovation, there are several technologies that have produced novel value chains for insurance companies and law firms.

The widespread commercialization of sensors has resulted in a cost-efficient opportunity to measure and transmit data. This bypasses the ambiguity and uncertainty that is typically present through human reporting - even the most earnest reports are susceptible to subjective error. For example, the use of sensors in automobiles can drastically increase the accuracy and speed in resolving liability and damages for an accident.

AI leverages the data produced from these information technologies and offers value in building systems that can augment existing human capabilities or offer entirely new predictive capabilities. AI can be used to communicate with customers through chatbots that don’t require human intervention until a complex task arises. This saves time and can be executed with a strategic emphasis on promoting a positive customer experience. AI can also be used as natural language processing (NLP) to analyze legal contracts. This can be done with the concurrent supervision of a licensed professional or can be audited after an initial NLP passthrough. This promotes firm productivity by allowing employees to complete larger sets of NLP-augmented tasks with comparable accuracy or turn their attention to tasks that are more complex than current NLP capabilities.

These two instances of AI technology in claims management are already promoting operational efficiency and organic growth in insurance companies and legal firms. At a strategic level, these technologies are currently valuable because they promote productivity and reduce ambiguities previously thought inherent to the insurance claims process. AI technology also holds immense future value because the data it pores through today becomes the basis of models with the potential for high predictive power. Put another way, an early player using AI in claims management has more time to allow the data to compound in value.

These first-movers have already emerged. Aetna, valued at $69B and one of the largest insurers in the U.S., has already invested in internal AI capabilities with the successful roll-out of a NLP software that analyzes healthcare contracts. The success of this software has already set a pace of innovation to further access the productivity gains made possible through AI. Lemonade, a late-stage startup that has raised $480M, is an app-enabled insurance company that utilizes AI through a chatbot that handles low-complexity, claim-relevant information transfers from customers. Across the spectrum of industry giants to emerging companies, AI is showing its value in claims management. While the on-ramp to maximum performance continues to stretch forward, the boosts in productivity and efficiency made possible through AI may leave late adopters trailing in the dust in the coming decades.