Insurance Chatbots: Disrupting the Insurance Industry

Insurance Chatbots: Disrupting the Insurance Industry

How many times have you wished your insurance company responded instantly? That you didn’t have to wait out the weekend to file your claim or satisfy your demand for knowing processing time? If you ever had a car accident or medical emergency over a long holiday, then very likely this will strike a chord.

The insurance industry, although a latent adaptor of technology, is in the fast lane of modernization to create new insurance products, services, and business models. With fast evolving lifestyles powered by digital innovation, the nature of risk and insurability is also changing. This has compelled traditional insurers to reinvent and respond to competition, by focusing on unmet consumer expectations, cost reductions, new services and more insurance coverage. The search for the ideal platform for customer engagement has led to the adoption of AI chatbots.


Chatbots offer an instant 24/7 conversational platform for customers to satisfy their queries and register their claims. The intuitive and natural interface of the AI chatbots is found to provide efficiency across the insurance value chain – in healthcare, property, casualty, and underwriting.


Why Chatbots Are the Most Powerful Channel For Insurers


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The insurance chatbot is a robust application of Artificial Intelligence (AI), Natural Language Processing (NLP) and conversational User Interface (UI). These underlying technologies automate customer touch points to answer questions and provide instant support for any issue faced by the customer. The NLP capability is able to understand the language and context of customer problem and interact intuitively with a meaningful personalized resolution. Additionally, chatbots explain complex insurance products to customers; drive brand engagement and improve sales.


According to the 2016 report, The Future of Insurance, the biggest threat to insurance businesses is the threat of new entrants, as perceived by 80% insurers. In such a highly competitive landscape, the customer becomes the most important stakeholder. The ability to engage satisfactorily with the end user assumes utmost importance. With the AI-driven chatbot, insurers have a powerful medium of customer engagement for higher brand value, longer customer lifecycle and greater customer satisfaction. The traditional method of using auto email responders, automated text messaging or IVR based phone network for customer engagement is thus fast being replaced by chatbots acting as 24/7 virtual assistants.


As the chatbot adoption in insurance gains momentum, insurers are finding additional use of chatbot conversational data. Machine learning is used to learn iteratively and leverage analytics to make data-driven changes to policies and risks. Historical data is also used for product upsells, pushing customer notifications and insurance leads, making the chatbot an additional channel for sales.





Challenges Facing the Industry

The insurance industry works on an intermediary business model where brokers and agents bring in most of the business. So the insurer has low direct customer engagement. The agent’s role is mostly restricted to securing a new sale or insurance policy. He may not always be available for post-insurance query. The agent’s interest in ongoing customer engagement is negligible as his commission is received from the insurance company.


Thus compared to other industries, customer engagement in insurance is minimal. The lack of customer touchpoints means that insurers have fewer windows for insights into customer needs or the ability to use these insights for data-driven decisions. However, with an evolving marketplace, the desire to become more consumer-centric and enhance personalized services has transformed the insurance industry.

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On-Demand Marketplace

As the traditional business model of the insurance sector gets disrupted with digitization and an “always connected” lifestyle, it is being replaced by a digital marketplace that fulfills customer demand with immediate access. This has created a need for 24/7 customer engagement platforms.


Changing Customer Expectations

Customer expectations have changed in recent years. The millennial generation which makes up a significant customer base, are “digital natives” with high spending capacity. They have tall expectations of convenient, transparent, speedy and personalized services. Even before they’ve bought a car, they want to insure against all possible contingencies. They make plans of buying a house and insuring even before they have tied the knot. They have the wherewithal to spend but expect the best in customer service.


The evolving customer preferences and expectations are a challenge that the insurance industry is looking at. More and more digital channels like chatbots are being deployed for ensuring good customer relationship management to customers with high expectations.

Digital Disruption In the Insurance Industry

New digital players with low-cost technology platforms and cutting-edge business models are challenging the old insurance companies.  Less operational costs, greater risk tolerance, and high brand value are leading to higher returns on investment within a short span. 44% of these insurance tech companies are start-ups with less than 10 employees. Almost all of their operations – sales, customer assistance, claims filing and processing, upsells – are conducted digitally through virtual bot enabled assistants or chatbots.  Such a competitive landscape is compelling insurance businesses to innovate and deploy AI driven chatbots.


The Drivers of Change in Insurance


As the insurance industry embraces the chatbot technology for customer service, future risk management policies are also being shaped by data collected at every touchpoint. Customer behavior like nature of queries and frequency of claims filing, response to policy incentives and premium, are analyzed for managing risk, policies and potential insurability.


The insurance industry is aware of the most critical problem, that 30 % customers do not have a positive experience when filing claims. The Capgemini and Efma 2017 World Insurance Report find an alarming drop in positive customer experience fuelled by high digital customer expectations.


This gap is being addressed with the use of chatbots for instances ranging from incident management to sales, billing and problem resolution. Customers are allowed to register claims, get e-copies of policies, check policy status or claim status, and locate a branch or hospital. Chatbots are responding to customer queries on health and motor insurance, premium payable for property insurance, and the various clauses that govern each policy.


Provide more customer touchpoints – Shaped by experiences in other consumer-facing industries, customers expect more one-to-one personalized trajectory for their queries and support. Chatbots provide just that, with variable touchpoints from 24/7 virtual assistants to bots for specialized policies.


Provide better customer experience – An enhanced customer experience is offered with the chatbot drawing on the customers’ geographic and social data for personalized interactions. Insurers are also able to customize recommendations for coverage of specific items and events, known as on-demand insurance.


Provide assistance in claim filing – One of the most transformative uses of chatbots in insurance is in claims processing. The long and often tedious processes are simplified with the automated interaction between the insurer and the insured. Chatbots provide assistance to register the incidence of loss, schedule appointment for an evaluation, arrange emergency support during accidents, and offer customized post-disaster assistance.


For speedier and customized claims settlement – Automated customer interfaces and virtual claims make it speedier to settle and pay claims while simultaneously minimizing the likelihood of fraud.


Leverage the IoT network – The insurance industry is increasing spends on IoT-related technology and solutions. For instance, in motor insurance, IoT telematics or usage-based insurance is used to improve customer experience and satisfaction. In healthcare, wearables and health trackers enable insurers to determine costs associated with an insured’s health. In an IoT network, chatbots can help speed-up settlement of claims, with faster verification of risk management information, in place on costly assessments and audits.


More sales, higher returns on marketing investment – Insurance chatbots are able to simulate human conversations with an intelligent intuitive underpinning to understand what a customer is looking for and easily recommend a relevant product. The bot can pull a quote instantly and save time. Chatbots also aid marketing efforts by positioning customized insurance products as part of the ongoing conversation. Besides, chatbots can reach huge numbers of customers at the same time, cutting the marketing costs for insurance companies.


Act as an automated insurance agent – Agents often lack the expertise or knowledge to handle specific needs of insurance cover, or the unique issues of diverse businesses. They either take time to revert or offer unsatisfactory advice. However, chatbots are highly automated and efficient, able to tackle any customer needs with an instant response. This remarkable ability of chatbots is the reason why customers prefer to book their insurance virtually instead rather than time-intensive human agents.


Support automated underwriting – Chatbots offer conversational interface instead of time-taking static web forms. This simplified process gathers data at the same time, which helps perform automated underwriting functions based on the dynamic data.  Imagine automating the rows and columns of actuarial spreadsheets using an ML capability, for underwriting insurance!



Chatbots are proving to be critical to the future evolution of intelligent customer services in insurance. They are effectively providing customer support with a minimal setup to improve the customer support process. Insurance chatbots are gradually taking over the operational processes of insurance with live streaming assistance. So next time when you make a claim, you may be talking to a robot

Robert Rafferty

Robert is a Growth Hacker enthusiast that’s joining Rocketbots as the Head of Growth. He helps Rocketbots in becoming the voice of all things conversation and is famous for wearing shorts to the office. A graduate of the College of Business at Florida Atlantic University.

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