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In a recent interview by Claims Journal, industry leaders Oded Barak, Co-founder and CEO of Five Sigma, and Marc Rothchild, Senior Vice President and Head of Claims at Exceedance, shared their views on how AI is reshaping the future of insurance. They discussed the transformative power of AI and its ability to streamline claims management, enhance decision-making, and improve efficiency across the board.
As the insurance industry faces mounting pressures—rising customer expectations, complex claims processes, and increasing operational costs—AI has emerged as a key enabler of innovation. This interview provides valuable insights into how insurance companies can leverage AI to stay competitive, meet regulatory requirements, and deliver better service to policyholders.
From the Early Days of AI to Today: Enhancing Efficiency and Accuracy in Claims Management
Initially, AI entered the insurance claims space through simplistic machine learning models. These early implementations focused on computer vision for damage assessment, optical character recognition (OCR) for documents, and pattern recognition for fraud detection. These capabilities allowed insurers to automate tasks that previously consumed vast amounts of adjusters’ time.
Today, AI enables claims teams to triage claims based on complexity, assign them to the right adjusters, and even automate document classification. AI is improving how adjusters handle the daily influx of data—everything from emails to videos—and allowing them to focus more on customer service and critical decision-making. These developments make AI a vital tool in achieving operational efficiency while reducing the workload on claims professionals.
Better focus on customer service is one of the biggest advantages AI can help achieve. Claims adjusters often deal with overwhelming amounts of policyholder communication and documentation for compliance. AI’s ability to transcribe, summarize, organize and analyze this data streamlines the process. It allows adjusters to deliver better outcomes by focusing on the core tasks of decision-making and customer interaction, while AI is doing the heavy lifting.
GenAI: The Next Frontier of Claims Automation
While traditional AI models have made incremental improvements, the introduction of Generative AI (GenAI) opens up a new world of possibilities that would change adjusters’ work altogether.
Unlike previous models, which were designed primarily for analyzing existing data, GenAI is designed to create new content and provide intuitive solutions to complex problems. GenAI allows insurers to take automation to a whole new level, enabling the planning of claims handling, automating the drafting of personalized communications, and suggesting the next steps in a claims process, and even predicting settlement amounts and legal outcomes.
For example, GenAI can analyze an incoming claim from a policyholder —and immediately automate the FNOL, population all fields, opening exposures, checking the claim against the policy coverage, and offer tailored suggestions based on the details of the specific claim, helping adjusters do their work faster and to focus on tasks where human judgment and empathy are needed.
Furthermore, GenAI supports deeper straight-through processing (STP), which automates the entire claims process for specific claim types. While STP has traditionally been applied to simple claims, such as auto or property damage, GenAI enables insurers to expand this automation to more complex claims, including those involving bodily injury. By improving the accuracy and speed of claims processing, GenAI helps insurers reduce costs, improve customer satisfaction, and stay ahead of competitors who are not using AI.
Overcoming Adoption Challenges in AI Implementation
Despite the promise of AI, the insurance industry has faced several challenges in adopting this technology.
One major obstacle is the highly regulated nature of the insurance sector. Insurers must navigate a complex web of federal and state regulations, which can slow the adoption of new technologies. In many cases, carriers are cautious about adopting AI until they are sure it complies with regulatory requirements and provides sufficient transparency in decision-making processes.
Moreover, a conservative management at many firms remains a significant hurdle in adopting new technologies and workflows. Many senior executives are resistant to change, particularly when it involves the integration of cutting-edge technologies like AI. This is also true for adjusters at all levels, who may be wary of AI encroaching on their roles or fear that automation could lead to job losses. It’s essential to build trust in AI as a tool to enhance adjusters’ productivity and capabilities, rather than replacing them. Humans are still needed in insurance for the foreseeable future, though human roles will inevitably change.
To overcome these barriers, insurers must focus on fostering a culture of innovation within their organizations. Insurers need to invest in training their workforce to understand and effectively use AI tools. By tailoring skill sets and offering ongoing support, insurers can help adjusters see AI as a valuable assistant that frees them from mundane and manual tasks and allows them to focus on higher-value work.
Another key aspect of successful AI adoption is ensuring that AI solutions are designed with compliance and transparency in mind. It is crucial that AI systems meet regulatory demands and offer clear explanations for the decisions they make. This ensures that AI tools are used responsibly and would gain the trust of insurers, regulators, and policyholders.
The Benefits of AI: Reducing Costs and Improving Decision-Making in Insurance
One of the most significant benefits of AI is its ability to reduce costs while improving decision-making. In the interview, both Rothchild and Barak highlighted the ways in which AI can streamline claims handling and improve the overall efficiency of insurance operations.
AI reduces the time adjusters spend on administrative tasks by automating data entry, document classification, and communication management. This allows adjusters to process claims faster, improving the policyholder experience and reducing loss adjustment expenses (LAE). As insurers adopt AI-driven claims solutions, they also report reductions in claims cycle times and better accuracy in claims settlements—all of which contribute to cost savings.
Moreover, AI enhances decision-making by providing adjusters with real-time insights based on analysis of historical data, trends, and policy details. For example, AI can suggest the best course of action for a claim, recommend appropriate vendors, or even calculate reserve amounts based on similar cases. By leveraging these AI-driven recommendations, adjusters can make more informed decisions, leading to more accurate claims handling and better outcomes for both the insurer and the policyholder.
The Future of Claims Management: What’s the Next AI Innovation?
Looking ahead, both Barak and Rothchild see several emerging trends that will shape the future of claims management.
- Expansion of Straight-Through Processing for Complex Claims: A significant development in the increased use of straight-through processing (STP) for handling more complex claims. With the integration of GenAI, insurers will be able to automate a wider range of claims processes, including those that currently require human intervention. This automation will lead to improved efficiency and substantial cost savings in the claims management process.
- Focus on Personalized Customer Experiences: Another key trend is the growing emphasis on enhancing customer experiences through personalization. As AI becomes more advanced, it will enable insurers to deliver more tailored communication and support to policyholders. By analyzing large datasets, AI can predict customer needs and preferences, allowing insurers to provide proactive service and reduce resolution times. This will significantly improve customer satisfaction and loyalty.
- Transformation of the Insurance Workforce: AI will also have a profound impact on the insurance workforce. There’s a need for insurers to invest in upskilling their employees so they can effectively work alongside AI tools. This shift will improve the efficiency of claims handling and create new opportunities for career growth and development within the industry. AI will empower employees to focus on higher-value tasks, transforming their roles and enhancing overall performance.
Conclusion: AI as a Tool for Empowerment, Not Replacement
As AI continues to evolve, it is clear that its role in the insurance industry will only grow. However, as both Barak and Rothchild emphasized, AI is not here to replace human adjusters. Instead, it is a tool designed to empower them—helping them work more efficiently, make better decisions, and deliver superior service to policyholders.
For insurers looking to stay competitive in the digital age, embracing AI is no longer just an option. By investing in AI-powered claims solutions, insurers can reduce costs, improve operational efficiency, and enhance customer satisfaction.
At Five Sigma, we are proud to be at the forefront of AI innovation, offering an AI-native claims management platform that simplifies and accelerates the claims process, empowering adjusters to excel.
Five Sigma recently introduced Clive™, the industry’s first AI Claims Adjuster. Clive offers unparalleled automation and insights on top of any claims management system (CMS), adding fantastic AI capabilities to older systems. Clive automates routine tasks, dynamically plans claim handling, and advances the claim through automatic execution of tasks, all according to the insurer’s standard operating procedure (SOP). Clive drives efficiency and accuracy in claims handling with the power of artificial intelligence.
