Insurance companies have increasingly integrated digital processes into their customer journeys, yet the adoption of artificial intelligence technologies lags behind.
A recent Altus Consulting’s study about Insurance Digital Experience reveals that almost all insurers now allow consumers to sign up for services digitally. However, less than half use chatbots to streamline customer engagement.
Many businesses invest in AI due to fear of missing out, yet struggle to find practical applications. One of AI’s foundational promises remains under scrutiny.
Despite claims that AI will reduce administrative jobs, many service providers hesitate to use it for customer experience tasks, according to Artificial Intelligence Integration in Investment review.
AI is the future of customer service
AI has long been touted as the future of customer service. Large companies once sought AI-powered chatbots to handle customer feedback and simple tasks, aiming to reduce headcounts and lower call center staff pay (see why Artificial Intelligence Becomes an Unexpected Risk for Insurance).
Insurance consumer surveys reveal negative perceptions of AI in customer service.
In 2022, one survey found that a third of respondents felt customer service had worsened with AI, and more than half said chatbots and AI tools “never understand” requests or problems.
A new study highlights the current impact of technology on customer services in the insurance sector.
Insurers adopted digital processes
Over the past decade, companies have rapidly adopted digital processes across all sales and engagement lines, leading many to implement online forms for various procedures.
98% of insurers now offer consumers the option to obtain quotes and purchase policies digitally.
Additionally, 73% allow customers to submit the first notice of loss (FNOL) via digital forms or apps (see How Does AI Technology Help Insurers?).
More than half of all insurers provide digital options for mid-term adjustments (MTAs) and renewals. However, despite the hype around AI technologies, only 44% of insurers use automated chatbots for customer interactions.
Adoption of AI in home and car insurance
Adoption of AI has been higher among home and car insurers, with usage rising from 34% in 2019 to 52% in 2024. In contrast, higher-risk offerings like life insurance have seen less chatbot adoption due to concerns about customer dissatisfaction and errors.
Researchers believe AI still has the potential to improve customer interactions significantly.
Altus has surveyed this area for a decade, noting little change in digital customer experiences over the past five years.
Deploying AI beyond chatbots may be the key to enhancing these interactions. The challenge is to embrace AI as a tool to transform insurance industry value chains (see Key Benefits of Innovative AI).
Insurers should use AI to augment processes, handle large data volumes, and meet immediate customer needs, thereby improving the customer journey and achieving long-term ROI.
AI touted as a transformative business tool
In recent years, artificial intelligence (AI) has been touted as a transformative business tool. However, its impact often falls short of expectations.
Approximately 85% of AI-related business projects fail. Like other so-called breakthrough technologies such as cryptocurrency, blockchain, and the metaverse, AI proponents claim that businesses are not finding the right use cases
AI has been widely promoted as the future of customer service. AI-powered chatbots, in particular, were once in high demand by large companies.
They were expected to handle customer feedback and simple tasks efficiently, allowing companies to reduce headcounts and lower call-center staff wages.
Many businesses are moving away from chatbots because customers largely dislike them.
A recent Capterra poll supports this sentiment, explaining why companies are hesitant to continue using AI in customer service.
Which option is the first choice for support for insurance consumers?
Of 1,000 consumers polled, 62% said chatbots couldn’t solve complex or specific issues. Meanwhile, 51% of customers added chatbots “never understand their requests or needs” – not “occasionally misunderstood” or “often misunderstood”; “never”.
50% noted chatbots generated frustration by being repetitive and running in circles – potentially making customer retention less likely.
That is because three-in-ten customers told Capterra that they would stick to a brand that gave good customer support, even when cheaper competition existed.
So, to ensure that bracket of customer remains with a business, leaders would do well to remember that just 3% of all customers said they would choose chatbots as their top channel for help.
How has customer service evolved?
The respondents still showed preference for old-fashioned phone-based customer service, with human agents.
Receiving customer support via the phone was voted as the top choice by 42% of those surveyed customers, while 89% of all respondents expressed their preference for a human voice over a synthetic one.
The main advantage of phone calls identified by 74% of customers was that they allow them to explain themselves and ask more questions.
Firms replacing call centers with chatbots may have negatively impacted the most popular contact methods. About 79% of respondents reported that waiting in a queue was a major downside of calling, which a larger staff could help alleviate.
Consequently, some now prefer another popular contact method.
Approximately 39% of respondents now use live chat with human agents via apps like WhatsApp. Of these, 52% appreciate the flexibility in availability and hours.
However, they find live chat less reliable than phone calls, with 54% expressing concerns about unclear explanations and miscommunication.
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AUTHOR: Mark McDonald, general insurance practice director at Altus Consulting
