How life insurance companies can leverage chatbots

By Bob Gaydos

As digitization continues to gain pace in the life insurance industry, carriers are increasingly looking for new technologies that can improve their customer support and operational efficiency. One technology that has garnered a lot of recent attention is chatbots. Powered by artificial intelligence and machine learning tools, chatbots promise big changes in the coming years to both customer support and the underwriting process.

However, we must keep in mind that AI-powered chatbots are still a relatively new technology. Even the most forward-thinking carrier is still unsure of both how to fully leverage this technology and what the full effect of its use will be. For my part, I’ve seen these chatbots in action and I believe they can be an effective tool for speeding up the underwriting process and improving the customer experience.

That said, carriers should take a strategic approach when deploying AI-powered chatbots. They aren’t a silver bullet and any use of them must be tempered by an understanding of both how they work and their current limitations.

Using AI-powered chatbots

Chatbots have been around for a long time and most people are familiar with them. They are essentially software applications that can hold basic conversations with a user when they visit a website. What has changed in recent years is that the language models that govern these applications have become far more sophisticated. The latest models, powered by ChatGPT and its AI ilk, are almost uncanny in their ability to sound like real humans and hold in-depth conversations with customers.

As for how insurers can use these new chatbots, my own company has had a lot of recent success using them as what I call “pizza trackers.” Today, when you order a pizza online, the application can verify that your order has been received, and it can tell you when your pizza is in the oven and when it’s on the way to your door. Well, these AI chatbots can do the same with a life insurance application.

Imagine this scenario. A customer has just made an online application for a life insurance policy. They are greeted by the chatbot, which informs them that their application has been received and is currently being processed. If at any time the customer wishes to know where their application is in the process, they can ask the chatbot, which will also answer any other questions the customer might have about the application.

Using chatbots in this way can introduce a new level of transparency into the underwriting process that customers have never experienced before. Just as importantly, chatbots also allow an insurer to set the right expectations with their customers. Although the underwriting process is straightforward, most customers have little idea of how it works. They may need some assurance that the wheels are turning and that someone is listening to them, even if it’s just a bot.

Chatbots can also source any additional information from a customer that might be required for completing an application. Customers are more likely to respond quickly to these requests because there is an immediacy to chatbots, unlike emails. On top of that, chatbots can help customers when they are stuck on an application or don’t know which policy to apply for. This essentially allows a chatbot to serve as a “digital field underwriter,” and can gather preliminary information on a customer and assign them to an appropriate product class.

Implementing chatbot technology

Riding off the AI hype train, there are currently countless AI chatbot vendors in the market, with more arriving every day. For life insurers that are looking to adopt this technology, my advice would be to choose a vendor based on two essentials. First, for obvious reasons, your chosen chatbot should be HIPAA secure. At a stroke, this requirement instantly reduces the number of vendors you have to choose from since most are not HIPAA secure.

The second requirement is that the chatbot must be capable of integrating with your current data system. This can be really challenging as most carriers are working with a hodge-podge setup that includes a mix of on-site systems and third-party platforms. Carriers that haven't kept their data systems up to date are going to struggle with this requirement. On the other hand, carriers that have kept up will have a competitive advantage since they can begin deploying their chatbots almost immediately.

Beyond meeting these requirements, launching your chatbots is not a difficult operation. The technical side of things may take as little as three months to complete. However, to get there, every department must be on the same page. The underwriters will certainly want to have a say in how these chatbots will operate. If the underwriters are not on board with the plan then it will never get off the ground.

Looking ahead

There’s no doubt that the current generation of AI chatbots show highly impressive capabilities. Even so, it’s clear that more is still to come for the future of this technology. Looking ahead, it’s easy to imagine a chatbot that knows everything about a customer’s background and persona from the moment of initial engagement.

This is something my own company is working on now and which we hope to roll out in the next few months. This chatbot would be trained on vast streams of customer data and provide a higher level of personalization and support when engaging with customers. Having a chatbot that can search for available information on a potential customer during the application process would greatly expedite the application process. However, it needs to be said that we are moving into unknown territory. While the current hype around AI is palpable, it remains to be seen whether AI will be all that it promises to be.

As such, I’m cautiously optimistic about whether creating a proactive chatbot is even possible to create such an advanced chatbot. If it does succeed, then it could truly revolutionize the customer-facing side of the life insurance industry. Such projects are really at the edge of what current AI technologies can do, but there's no reason to think that edge can't be expanded as AI evolves and matures over the coming years.

AI chatbots have huge potential in the life insurance industry. Although an improved customer experience is one of the top benefits of this technology, those benefits can also extend to the underwriters who will be able to compress the time they spend on each application. Whether chatbots will also have the ability to understand every customer’s persona still remains to be seen but, for now, the outlook appears promising.

Bob Gaydos is the founder and CEO of Pendella. He may be contacted at [email protected].