Insurance agencies are increasingly turning to artificial intelligence (AI) to streamline operations, enhance client services and gain a competitive edge. While the benefits of AI integration are enticing, it is essential for insurance companies to carefully consider the potential drawbacks and challenges associated with adopting these advanced technologies.

Two potential benefits are:

1. Efficiency and Accuracy

One of the primary advantages of AI integration in insurance agencies lies in its ability to revolutionize traditional processes. AI algorithms can automate repetitive tasks such as data entry, claims processing and risk assessment, leading to significant improvements in efficiency and accuracy. By leveraging AI, insurers can expedite claim resolution, optimize underwriting decisions and enhance the overall client experience.

2. Insights and Personalization

AI empowers insurance agencies to unlock valuable insights from vast amounts of data. By analyzing client information and market trends, AI algorithms can offer personalized insurance recommendations tailored to individual needs.

An example would be where the agency uses AI to predict which clients are likely to cancel their policies impacting retention.  AI can evaluate client behavior, such as frequency of interactions, payment history, and claims experience, to assess churn risk.   

This level of customization not only strengthens client engagement but also enables insurers to optimize pricing strategies and mitigate risks effectively.

Exploring Challenges and Risks

However, alongside these benefits, AI integration presents several challenges that insurance agencies must navigate effectively:

1. Data Privacy and Security Concerns

Insurance companies manage sensitive client data, making data privacy and security paramount concerns. AI systems must comply with stringent regulations to safeguard client information and mitigate the risk of date breaches or cyber-attacks. Establishing robust security measures and ensuring compliance with regulatory requirements are essential steps in addressing these concerns. Good resources for this type of information include NIST AI Risk Management Framework (NIST AI RMF) for managing risk associated with AI Technologies. The Federal Trade Commission (FTC) also provides guidelines for data privacy and AI-related consumer protection.

2. Transparency and Trust

Another challenge is ensuring transparency and building trust with clients. AI-driven decisions may lack transparency, leading to concerns about fairness and accountability. Insurance agencies must proactively communicate with clients, providing explanations for algorithmic decisions (Automated Underwriting) and addressing any issues related to bias or discrimination. Building trust through transparent communication is crucial for fostering long-term client relationships.

Balancing Automation With Human Expertise

Moreover, while AI automation offers undeniable benefits, it is essential to strike a balance between automation and human expertise. Over reliance on AI may diminish the role of human employees and increase the risk of errors or algorithmic bias. Insurance agencies must invest in employee training and development to ensure they have the skills and expertise to collaborate effectively with AI systems. Hopefully, we will see more training offered by our industry groups on this collaboration. We provide hands-on training in the agency using various AI tools and most often incorporate the human side to review what is generated by AI for both accuracy and the tone and brand of the agency. 

Opportunities Within My Agency

Considering the various pros and cons outlined above, my agency has found that there are so many opportunities for use today. As we use our management system and the tools we integrate with, we have created efficiencies using AI. These include managing our communications and documentation. Based on the rules we set up in our management system, we have reduced our costs in handling repetitive tasks by taking over various activities and tasks based on specific events that occur. This allows us to also redelegate our resources to client facing activities.  We are beginning to use chatbots to assist clients in filing claims. This allows us to provide 24/7 support. We continue to look at other opportunities that we can use to provide better service to our clients.

Final Thoughts

AI integration holds immense promise for revolutionizing the insurance industry, offering opportunities to enhance efficiency, personalize client experience and mitigate risks effectively. However, realizing these benefits requires insurance agencies to address the challenges associated with data privacy, transparency and human-machine collaboration. By navigating these challenges thoughtfully, insurance agencies can use AI to create efficiencies and deliver greater value to clients in an increasingly digital world.

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 Brian Bartosh is president of Spire America Holdings, Inc., which has primary offices in Alpena and Traverse City, Michigan. The agency operates under the trade names of Top O’ Michigan Insurance Solutions and Spire Insurance Solutions. Founded in 1974, the agency is celebrating their 50^th anniversary. They currently use Applied Epic Browser.