AI is also being implemented by banks within middle-office functions to assess risks, detect and prevent payments fraud, improve processes for anti-money laundering (AML) and perform know-your-customer (KYC) regulatory checks.
How AI Helps Fraud Prevention in Banking and Finance :
Frauds remain the biggest challenge for the banking industry and its clients, leading to massive losses every year. Credit card is the most prevalent form of fraud and, according to one study, 270,000 cases of credit card fraud happened in 2019 alone. Most of the scams occurred with retail consumers, but companies and sometimes even banks have directly experienced massive losses following such fraud cases.
The financial business is now using state-of-the-art artificial intelligence technology to intercept these frauds as quickly as possible to stop them from happening. Let us see some of the key areas where AI is extensively used to identify or prevent financial fraud.
Cybercriminals often obtain bank account details or credit card details through different means and use them to do illegal transactions and siphon off the victim’s accounts. If transfers are not halted quickly, it becomes impossible to reclaim money and is frequently lost permanently.
Banks are now implementing machine learning algorithms that can detect irregular transactions almost real-time, avoid them from occurring automatically, and alert the authorities.
Cybercriminals target vulnerable people by sending them email links that claim to be mail from their bank. By clicking on a link, criminals can access their confidential banking or card information for fraudulent transactions. As per the new report of the computer protection firm ProofPoint, 9.2 million malicious emails were obtained from users in 2020. And, sadly, about 30 percent of phishing emails are available to vulnerable targets.
While banks are not directly involved in preventing such phishing scams, credit goes to email companies like Google. They already have sophisticated machine learning algorithms that warn the customer that this is a phishing mail and should not be clicked or sent to the spam box instead. Gmail’s machine learning blocks more than 10 million spam and malicious emails per minute.
False Insurance Claims
It is not rare for insurance providers to receive fraudulent insurance reports from persons and companies. If such allegations are not identified in advance, insurance firms could wind up paying insurance money to the scam claimant. Research estimates that insurance fraud results in a loss of at least $80 billion annually across all insurance lines, and the US alone saw a loss of $34 billion in 2019. One-third of the insurers conclude that fraud accounts for up to 20 percent of the premiums’ cost.
Artificial Intelligence Ushers in a New Era for the Insurance Industry :
The bots are taking over! But don’t be alarmed — they’re here to help.
Artificial Intelligence (AI) and machine-learning technology are vastly improving efficiency and customer satisfaction across various fields, and that includes insurance. Carriers and brokers have started leveraging AI to reform everything from the claims process to risk management, and that’s just the tip of the iceberg.
Never before has there been more opportunity to improve and democratize insurance options, making the entire process more user-friendly. This smart technology is now more widely available and easily accessible than ever before, and the possibilities are quite exciting.
The Digital Revolution
Not too long ago, policyholders could only file claims by phone or manually filing. Today, the insurance industry is evolving to meet the preferences of consumers as more and more people, particularly younger generations, prefer digital experiences.
Consider: According to a LivePerson survey of 4,000 young adults, 7 in 10 millennials and Gen Z prefer to communicate digitally, with texting being the most preferred form of communication.
Insurers like Wright Flood have noticed the cultural shift towards SMS and have implemented technology like “claims via text” to ensure that policyholders have access to a multitude of options when filing a claim.
Savvy insurance executives are embracing emerging technologies such as AI to build a digital infrastructure that can sustain the insurance industry of tomorrow
“Claims via text” offers automated text response systems to customers, allowing policyholders a way to speedily connect with their flood insurance carrier and receive immediate directions on how to start the recovery process. The ability to initiate and check the status of a claim via text at any time — particularly during prolonged power outages — is something customers truly appreciate. And claims submitted early using mobile technology are more likely to be paid expeditiously.
In addition to texting, being able to file a claim online has also increased in popularity. For companies like Wright Flood that offer this option, all an insured needs is a Wi-Fi connection, their policy number, and their property’s zip code to open a claim. These portals also provide access to agent information, and policy coverage amounts all in one place, streamlining the insurance experience and improving customer satisfaction.
AI: The Next Step in InsurTech
Just like other industries in the U.S., insurance is catching the AI wave and implementing smart solutions, like chatbots. Improved machine-learning technology paired with millennial and Gen Z consumer behavior has made the idea of chatbots more acceptable. In fact, according to a study done by Business Insider Intelligence, 80% of companies are either already using or plan to use chatbots by 2020.
Knowing how and why chatbots are used, it’s easy to see why this technology lends itself to the claims process. For instance, 37 percent of Americans said they would use chatbots to get a quick answer during an emergency, according to a joint study done by Drift, Salesforce, and myclever.
Today, insurance companies are using this knowledge about consumers to integrate chatbots into their claims management strategies. Wright Flood, for example, is the first flood insurance company to implement a claims bot — CLOE.
So how do claims bots work? We can use CLOE as a model. Developed in conjunction with Pypestream, CLOE’s conversational interface simulates chatting with a human customer service representative. And the fully automated chatbot is completely encrypted, offering policyholders peace of mind that the process is secure.
To file a claim, the insured, agent, or third party must first authenticate the insured property address. Through this process, they will be notified if there is a possible duplicate claim, minimizing the risk of fraud. Then, the user answers a series of conditional questions that are personalized based on their responses, and with very little effort, a new claim has been opened. At the end of the process, they will be provided with their claim number, adjuster information, and a reference document advising them of what steps to take next.
Moreover, AI bots are also helping people find tailored insurance plans that fit their specific needs. Today when looking for a plan, property owners can simply share their coverage needs with an AI bot, and within seconds it will generate customized options specifically for that property owner based on a variety of factors such as location, measurable risk, and cost.
The Future of AI and Insurance
Beyond chatbots, there is so much that AI has to offer the insurance industry. Machine-learning technology will transform and improve risk models, coverage options, fraud detection, and more.
AI bots capable of learning from previous events and situations will make for substantially better and more accurate risk models, which will, in turn, mitigate and even prevent certain risks from occurring. When it comes to premiums, these bots will be able to generate hyper-customized plans based on an insured’s individual risk profile, and the information customers provide, rather than offering one-size-fits-all options. While fraudulent claims will always be an issue, AI is helping to reduce the occurrence and making it increasingly difficult. Currently, it is impossible for human representatives to gather and process every piece of information that could indicate fraud. AI tools, however, can process unlimited amounts of information, making it infinitely easier and more efficient to detect deception.
The capabilities of AI in the insurance field seem to be endless. As time goes on, there will likely be applications of this technology that we cannot even imagine in the present day.
Technology has allowed the insurance industry to expand and address trends and segments of the market while making it cheaper, better, and faster for us all. Savvy insurance executives are embracing emerging technologies such as AI to build a digital infrastructure that can sustain the insurance industry of tomorrow.
We are living in exciting times where things that once seemed impossible are now readily attainable. As former President Ronald Regan once said, “There are no great limits to growth because there are no limits of human intelligence, imagination, and wonder.”
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