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CognitiveScale Blog

Preparing for Long Term Impacts of the COVID-19 Pandemic: How Insurers Should Leverage AI

By Max Kanaskar Mar 23, 2020 11:23:05 PM

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The COVID-19 pandemic has brought the global economy to a screeching halt; wide swaths of the economy have already started feeling the pain, including airlines, commodities and even banks. Insurers are facing the double-edged sword of decreasing market demand on one hand and increased market volatility on the other. Life insurers are particularly exposed due to higher interest rate risk and mortality exposure resulting from the pandemic. And P&C insurers can only go so far holding their pricing amid escalating customer stress and rising government pressure to pay out policies even in the absence of a pandemic risk rider. As a group, S&P 500
P&C insurers are down 29% since the start of the year, with a more than 51% decline for life insurers.

The economic impact of COVID-19 is widely expected to be long lasting even though the risk exposure may peak and subside relatively quickly. To prepare for this sustained environment of slower growth, market volatility and ultra-low interest rates, insurers need to fire on all cylinders to maintain earnings in the short term and solvency in the long term. For example, insurers need to be extra vigilant with fraud, as insureds under economic pressure resort to
overt and covert means to get insurers to pay up. As businesses become more selective about risk transfer and more demanding with pricing, insurers will need to ensure appropriate underwriting profitability, growth and loss reserves. Most importantly, they will need to do so with scaling existing resources and without the luxury of building out capacity: this is where small automation enabled by artificial intelligence (AI) can help. Well capitalized and diversified insurers have the time and resources to weather this storm and prepare for the future – if they mobilize and start today with intelligent automation and AI.

There are four major levers insurers should use to sustain earnings in their existing business models and look to applying intelligent automation and AI:

Lever

Opportunity from Intelligent Automation and AI

Drive Engaging Customer Experiences

Personalize the experience at scale
Drive proactiveness and provide great service 

Streamline Underwriting and Improve Pricing

Take out cost and reduce manual efforts
Fine tune risk-based pricing

Improve Distribution Effectiveness

Enable direct-to-consumer in a cost-effective manner
Enable my agency network

Drive Self Service Claims & Reduce Claims Exposure

Streamline claims processing
Reduce claims fraud


Gaining efficiencies from automation and AI is a long-term game, but one that insurers now have a compelling event to start playing. Driving benefits from AI does not have to mean making large capital outlays and undertaking massive business process change: insurers should pursue low hanging fruit where benefits are good and intelligent automation is feasible and quickly implementable. As with other periods of economic turmoil, insurers will weather this one too, but the ones that come out stronger will be the ones leveraging intelligent automation and AI.