HOW IBM WATSON IS CHANGING THE INSURANCE INDUSTRY

Photo by fauxels

Originally Posted On: https://www.lpa.com/blog/how-ibm-watsons-predictive-analytics-is-changing-the-insurance-industry

The insurance industry has always been competitive and fast changing consumer demands are making it even harder for providers to stay relevant, cost efficient, and profitable. Besides the inherent volatility of the industry, insurance companies are also facing increased challenges in customer attrition and claim fraud.

Thankfully, new technologies are helping insurers overcome these hurdles. In particular, AI driven predictive analytics has helped more than two-thirds of insurers prevent issues and reduce underwriting expenses. Meanwhile, 60% say that it helps them increase sales and profitability.

Here’s what you need to know about predictive analytics, how it’s changing the insurance industry,  how IBM Watson is helping insurers assess insurance claims 25% faster, and how to implement this technology to get the highest ROI.

Predictive analytics uses advanced analytic techniques to process a large amount of historical data, generate real time insights, and predict future events. This AI driven technology employs various statistical tools and techniques to help businesses uncover potential risks, identify opportunities, and drive accurate data driven decision making.

Here’s how insurance providers are using predictive analytics to improve cost efficiency and increase profitability:

It costs 7 times more to attract new customers than to retain existing ones, so retention is a critical profit driver for insurance companies. Simply having a customer retention program in place is no longer enough — companies need to focus on the right customers and align with an improved overall customer experience to yield the best results.

Predictive analytics allow you to understand customer history and behaviors so you can anticipate their needs. It also helps  identify customers that may be at risk of churning and take the appropriate actions to mitigate that risk — for example, by modifying your products and services to meet their expectations.

Insurance fraud is a major issue that impacts profitability. In fact, the Coalition of Insurance Fraud estimates that $80 billion is lost annually to fraudulent claims in the US. Predictive analytics can help identify and prevent potential fraud or pursue corrective measures retroactively.

You can also use predictive modeling to enhance fraud detection. An example would be gathering information from social media for signs of fraudulent behavior or monitoring an insured’s online activity for red flags.

Predictive analytics allow you to collect and analyze sophisticated data from first-hand sources (e.g., social media, smart devices, and interactions between claims specialists and customers) instead of third-party channels. This allows insurance companies to derive granular, accurate, and actionable insights to guide the decision making processes.

Predictive analytics can also help identify outlier claims that can become high-cost losses. For instance, you can use data from previous outlier claims to identify potential risks and create preemptive plans for handling similar claims in the future.

The ability to effectively prioritize certain claims allows you to save time, money, and resources. Predictive analytics can help triage claims based on predetermined rules to increase cost efficiency while simultaneously improving customer satisfaction.

Predictive analytics can also identify events, information, or other factors that could affect the outcome of claims to aid decision making. Also, it helps improve internal processes by pinpointing inefficiencies in workflows and streamlining the customer experience.

Traditionally, handling insurance claims require highly skilled assessors to keep up with regulation changes and make consistent decisions — a labor intensive and time consuming process that has become more costly and error prone due to many factors, such as the high degree of variation in member coverage and the tremendous amount of data that is now available to companies.

As such, many leading insurance companies are using IBM’s Watson Discovery to analyze structured and unstructured data, reference the right policy information, input documents, and generate insightful recommendations to help employees determine a claim’s eligibility and the appropriate payment amount.

Employees simply collect relevant information about a claim and input it into the system. Watson processes all available information and leverages historic data to offer recommendations. Employees then access these insights via a tab on the intuitive user interface to evaluate claims more efficiently with fewer errors.

As a result, insurance providers are assessing claims 25% faster and with greater accuracy. They’re also reducing costs, streamlining workflows, increasing profitability, and delivering a better customer experience that increases retention.

IBM Watson helps insurers leverage a large amount of first hand data available to them to make fast and accurate decisions on risk assessment, claim processing, and fraud prevention.

In addition, IBM Watson also gives insurance companies the ability to better understand customer behaviors, This insight allows best in class companies to create personalized offers and optimize every  interaction to deliver an outstanding customer experience that will increase retention rates.

To make the most of this powerful platform,  work with a reputable data science and analytics firm. Besides ensuring that the software is configured to meet your needs, your provider should:

• Understand your business objectives and tailor a strategic plan for your organization
• Identify high value use cases, as well as quick wins, to prioritize your resources
• Provide training and knowledge transfer to support internal growth in key areas
• Offer implementation services such as data preparation and data modeling
• Ensure successful deployment and user adoption across the organization
• Incorporate microservices or API services to support automation and improve cost efficiency

At LPA, our decades of experience and proven four-step process have helped many insurance companies achieve greater cost efficiency and profitability. Get in touch to see how we can help.