CX Spotlight by Fifth Quadrant

How One Startup is Using AI To Improve Insurance CX

Insurers worldwide are investing heavily in Artificial Intelligence (AI) as the benefits to internal operations and frontline service become more apparent.

According to Accenture, three quarters of insurance executives believe that AI is about to dramatically reshape the industry. Although many insurers are already using AI in their back office operations, in recent years there has been a push to bring it to the frontline through the use of chatbots. A rise in acceptance is coming with the new wave of chatbots too, with 74 per cent of customers telling Accenture they’d be happy to get computer-generated insurance advice and 78 per cent willing to take investment advice from a virtual assistant.

Wide uptake and big bucks

Data shows that insurers are not only aware of the importance of AI but also willing to make significant investments into it as well.

A recent global trend study by Tata Consultancy Services polled executives across 13 global industry sectors and found that 80 per cent currently invest in AI and almost 100 per cent intend to do so by 2020. Tata found that the insurance industry outspent the other twelve verticals surveyed, investing an average of $124m on AI systems, compared with the cross-industry average of $70m.

Chief Technology Officer of Tata K. Anath Krishnan said that the study highlights how AI will be a major game-changer for business competitiveness by 2020.

“It’s striking that the sectors making the boldest current or future AI investments and citing the most significant results seem to group around industries like insurance, travel, hospitality, and telecom, where disruption is having a major impact, and consumer-focused sectors such as the consumer packaged goods industry, where CX can be significantly enhanced by AI innovation,” he said.


US startup Lemonade has gone all in on AI, replacing brokers with bots and targeting a paperless and digital ‘instant everything’ approach to insurance.

Lemonade began operating in New York in late 2016 and is now licensed by 25 US states. Following a recent $120m capital raising, the company is pursuing global expansion.

“The insurance brands we know today came of age in the era of the horse-drawn carriage,” Daniel Schreiber, CEO & Co-Founder, Lemonade said in a statement. “But insurance is best when powered by AI and behavioural economics, which is why we believe that companies built from scratch, on a digital substrate and with a social mission, will enjoy a structural advantage for decades to come.”

Lemonade’s app asks users their address and several questions and then uses AI to craft a personalised policy. As Lemonade’s ability to tailor coverage for its users improves due to machine learning, the average policy value has grown by 50 per cent in the first six months of 2018.

In contrast to the traditional insurance model, Lemonade takes a flat fee and donates a portion of unclaimed premium dollars to nonprofits. With the flat fee creating less conflict of interest on payouts, Lemonade prides itself on settling claims quickly, in one case achieving a settlement in just three seconds.

A common theme around AI in the workplace is that it will augment rather than replace human capital. Lemonade's bot ‘Maya’ handles the claims it can immediately and passes on claims it can’t handle to the human claims team.

Lemonade says that Maya has a satisfaction score of 4.53 stars out of five, with 19 per cent of support requests handled by it from start to finish.



Humans must adapt too

Lemonade has divided its claims team into ‘squads’ with separate areas of responsibility around different loss types allowing them to become domain experts and increase their efficiency. It has also taken a ‘top down’ approach, assigning the team, which it renamed to Claims Experience, the following mission statement:

"Provide a shockingly great claims experience through empathy, transparency, availability, and speed."

To make sure everyone is aligned on this, Lemonade then redefined the claim team’s targets, moving customer experience, speed, and efficiency, to front and centre.

“We’re still implementing some of these changes, but the positive impact can be seen already: the median time to settle a manual claim has dropped from 11 days, down to 1,” Lemonade said in a June blog post.

Automating the back end

Lemonade has also invested in automating its back end operations. It has implemented ‘Cooper’, an internal automation brain that assists Lemonade’s developers in managing the workflow between product, engineering, and automated testing.

“It assigns tasks to team members, prepares testing environments in the cloud, runs tens of thousands of automated tests, and deploys everything to the hands of our customers when ready,” Shai Wininger Co-Founder of Lemonade said in January.

Cooper is continually learning and improving its ability to execute a range of tasks including the generation of modular legal documents, compilation of data for regulatory compliance reports, answering of questions, monitoring of financial transactions and running of fraud analysis.

To measure the progress and success of its automation, Lemonade has created an Automation Index which tracks the ratio between the number of Lemonade employees and active users in the system. The higher that index is, the more scalable the company becomes. As of June this year, the index was at 2,000 – four times better than at the same point last year.



Encouraging results

According to Lemonade, the results of it approach are encouraging. Whereas the top insurers have an average Net Promoter Score (NPS) score of under 20, Lemonade boasts an NPS of 70. Customer renewal rate, another metric for measuring customer satisfaction is also high, coming in at 97 per cent.

Lemonade is one example of how AI is being used to improve CX in insurance, dramatically improving the speed, efficiency and transparency of what has traditionally been a slow and opaque industry.

“By combining big data and AI with a seamless user experience, Lemonade is truly revolutionising the insurance industry,” said David Thevenon, a senior investment professional within the SoftBank Group, which was the lead investor in the recent capital raising.

To end on an Australian note, the field here is filling with players. With many CX experts agreeing that Aussie businesses and consumers are very willing to experiment with and adopt new technologies, Australia is fertile ground for uptake of AI. As we move into 2019, we'll no doubt begin to see which of those players will emerge as stars. 

One Australian company that is already bringing AI to insurers and other financial services providers is ASX-listed Flamingo AI, an Australian AI , machine learning and cognitive virtual assistant company. In July, Flamingo AI announced that it had 10 clients progressing through paid trials or software and services contracts across the US, Australia and Asia.

In the US, Nationwide Mutual Insurance Company is using Flamingo AI's Cognitive Virtual Assistant platform ROSIE to guide customers through their application and account set up for a retirement product. Meanwhile in Australia, financial services company AMP, peer to peer lender Wisr, credit union CUA and insurer Chubb are all at various stages of trialing Flamingo AI's Virtual Assistants.

Fifth Quadrant conducts research that empowers companies to improve their CX. To learn more about how Fifth Quadrant can assist your organisation, contact us today.

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Stefan Kostarelis

Written by Stefan Kostarelis

Stefan is the Content Manager at a Sydney-based investor relations firm, and a freelance writer whose work has appeared in Techly, Paste Magazine, Lost at E Minor and Tech Invest.

Topics: Artificial Intelligence CX Articles & Insights

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