Many insurance organizations worldwide have turned to artificial intelligence (AI) technology in recent months to help them address the disruptive changes in their business due to COVID-19. Their historical data and business intuition is no longer reliable nor relevant, as this New Normal has affected customer behavior and emergency responses that have dramatically shifted insurance workloads and approaches.
(Related: Will the Customers Come Back?)
In today’s climate, data accrued in the last couple months are of more value than data accumulated across the last five years. This means that all AI-based models need to be rebuilt to address the new trends we currently see. What’s more, scaling analytical processes and deploying automatically-updating AI models is critical now, more than ever.
In this article we will first highlight key struggles facing the industry by line of business, then we will provide examples for how AI can aid to shed more light as the situation develops.
The Long-Term Effects of COVID-19 on the Insurance Industry
Most of the insurance industry is relatively resilient to the pandemic. However, different business lines are affected in different way:
- Travel, trade credit, business interruption, and event cancellation insurance: Issuers of these lines were, of course, severely affected, some with long-term implications.
- Life and health insurance: At least some issuers of these products are likely to face more claims and a higher cost per claim. An additional, upcoming spike in health claims is expected to offset a decrease in spending resulting from postponed elective procedures. As millions of workers lose employer-sponsored health benefits, they may enroll in Medicaid, buy Marketplace coverage, or become uninsured.
- Auto insurance: Issuers of this product experienced a short-term decrease in claims as a result of a reduction in driving and a corresponding decrease in the number of accidents. In the coming months, many workers’ transition from relying on public transportation to using cars may lead to an increased number of claims.
- Cyber and fraud insurance: Claims against this coverage spiked in parallel to the real-world pandemic, as cyberattackers took advantage of work-from-home policies.
- Reinsurance: Reinsurers are likely to suffer significant material damages.
Moreover, for issuers of many lines of insurance, court litigation may become more aggressive, as plaintiffs’ lawyers try to compensate for revenue lost during the COVID-19 emergency.