The chatbot is on the rise.

You need only look at the celebrity status Amazon's Alexaachieved this year as a top Super Bowl ad to understand this. Soascendant is the humble chatbot that some retail industry punditsare describing 2018 as the year of AI and voice technology. Will that bealso true for insurance? How warm is the embrace by insurers,agents and their customers?

To be clear, it's not like the insurance industry is a laggardin this arena. Chatbots and AI are on the screen of most insurers.In fact, a recent survey by TCS finds the insurance industry outspent the othertwelve verticals surveyed, investing on average $124 million in AIsystems, compared to a cross-industry average of $70 million. Moreinvestment and more diverse applications are on the immediatehorizon.

As easy as aconversation

The benefits begin with the interface. Conversation is a simplerand more convenient mechanism for customers to provide informationthan the tedious form-filling common in insurance applications orclaims interactions. Voice-enabled digital assistants, i.e.chatbots, make short work of triaging incoming consumer andcustomer requests for insurance quotes, service, and claims, aswell as automatically handling routine requests.

Some insurers have implemented chatbots to start the autoquoting process on Facebook Messenger. For more complexdiscussions, representatives can then pick up the conversation byphone or private message.

Other chatbots can support an agent — via a conversationalinterface — to search and make queries against the agent's book ofbusiness (to access customer data, portfolio, and opportunityinformation), and their calendar and upcoming tasks.

Customers are warming tochatbots

So far, insurance customers have not shied away. In fact, theyhave taken a shine to insurer's digital helpers as much as theyhave to those of retail brands.

A recent Pointsource survey revealed that preferencesfor using chatbots with insurance are no different from thepreferences of engaging with retail companies. A total of 77percent of consumers are okay with interacting with chatbots if itmeans avoiding wait times for customer service representatives withinsurance companies, versus 75 percent for retail. On average,about one in four consumers at this point prefer chatbots for manyinsurance interactions, while about half want to talk with livehumans, and the remaining one-fourth don't mind one way or theother.

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The next step for insurance AI

There is enormous opportunity for insurers to useinsights curated by AI to devise and optimize customeroptions and actions, such as recommending products and servicesbest suited to customer needs, anticipating future requests, andanticipating factors that might cause customer churn.

For this reason, industry research shows data/text mining andmachine learning as the AI technology area with the most potentialfor insurers. Vast stores of structured and unstructured data arecollected and managed by insurers. Further insights from data oncustomers — including emails, notes and online postings from, to,and about customers— and on each customer's risks (aided by thegrowing amount of smart home, smart car, and other IoT data) candrive customer value.

Touchless auto claims are a good example. Chatbots can currentlyreceive first notice of loss messages and uptake photos of thedamage. The next step is AI algorithms, currently in development,that will take the images and estimate the repair cost, whilesimultaneously performing fraud checks, and promptly making a cashsettlement offer to claimants. These AI applications represent adifferentiating level of service by insurers that adopt them.

Expect chatbots to get smarter and grow longer arms and fingersthat will scour vast libraries of data to return not justinformation, but patterns of information that can be parsed to makecustomer and agent interactions increasingly relevant andreal-time.

Is AI a threat to insurance distribution?

Some look at the extraordinary capabilities of AI as a threat tothe distribution system. But it's hard to see how the real valuethat brokers and agents offer is going to be replaced by AI.Brokers who understand how to use AI to get better at their job orfocus more of their time on things that really matter to customersare likely to be more successful. Those that don't may findthemselves at a disadvantage.

Expect, for example, that AI will uncover personalized risk dataand coverage gaps that customers will be receptive to hearing aboutand mitigating through their agents.

What is holding insurance AIback?

There is no shortage of ideas for the application of AI.However, what will hold back insurers' fullleverage of AI is their inability to provide AI-enabled insight inreal time. For the majority of insurers, their operationalfootprint and analytics footprint are separate. The two need to bemerged to overcome the technology gap and time delay thiscreates.

New cloud-native architectures for core, digital, and dataoperations are designed to address this bottleneck. By removingconstraints on performance and data size, these new solutions willallow the application of all manner of personalized interactionsleveraging AI for real-time user experience at point of saleor engagement.