The art of empathetic conversation: How conversational AI is reshaping insurance

As the insurance industry races toward digital channels and self-managing policies, consumers are becoming increasingly discerning in their expectations for digital engagement. However, the complexity of insurance products means that customers often need human support to navigate issues or manage complex policies. This contrast between the push for digital self-service and the need for human support presents an opportunity for AI-powered virtual engagement through digital assistants. By providing human-like conversations, digital assistants can empower insurers to deliver a personalized and empathetic touch point but still be able to scale assistance with cost-effectiveness, making a case not only for heightened customer experience but also for operational efficiency. As we move forward into a digital-first future, the role of digital assistant engagement in insurance will only continue to grow, providing a valuable tool for insurers to meet the evolving needs and expectations of their customers.

In this Spotlight, IDC offers a comprehensive look at implementing digital assistance technology in the insurance industry, emphasizing the importance of strategy and execution alongside technology. By leveraging IDC surveys, this paper provides valuable insights into the business outcomes, considerations, and deployment tactics that insurance organizations are primarily utilizing to create successful conversational AI systems. It also shows how conversational AI programs can impact and improve every stage of the customer life cycle. Drawing upon real-world case studies, the paper aims to illustrate how some insurers have already unlocked the power of conversation and reaped the rewards.

The value of conversational AI in insurance: Key business outcomes

As reported by IDC's 2022 AIPath Survey, in developing the business case for AI-powered customer engagement, insurance organizations are aiming at the following key business objectives:

• Boost the quality of customer service: 44% of insurance industry respondents have recognized the potential of digital assistants in enhancing the customer experience by providing faster and more convenient service that is available around the clock. Customers can engage in natural conversations with digital assistants, circumventing the complexity of phone menus and text messages, and receive swift and precise responses to their inquiries. The automation of routine interactions such as answering frequently asked questions or addressing billing issues can free up human agents to focus on more complex needs, thereby improving the overall level of service provided. Moreover, the value of such tools extends beyond external-facing operations as digital assistants can also provide support to human agents by providing them with information when they need it to help resolve more complex calls. This can help to enhance the efficiency of internal operations and lead to increased customer satisfaction.
• Enhance business resilience and agility: 33% of respondents have grasped the potential of AI in providing a reliable and scalable solution to maintain business continuity during unexpected events such as natural disasters, pandemics, or sudden increases in call volumes. By reducing dependence on human agents, insurers can bolster their business resilience and agility while achieving greater efficiency and capital capacity. This can enable insurers to weather unforeseen circumstances while continuing to provide high-quality service to their customers.
• Raise competitiveness and market share gains: 31% of insurance industry respondents have emphasized the significance of conversational AI platforms in enabling insurance companies to achieve a competitive edge in a crowded marketplace by providing a unique and innovative customer experience. Digital assistants, with their conversational capabilities, offer opportunities for increased customer attraction and retention, as well as new revenue growth. During customer interactions, digital assistants can promote additional products or services, thereby maximizing revenue potential and enhancing the overall customer experience.

From interactive voice response to digital assistants: Implementation compass

For many years, IVR systems have been the go-to solution for insurance companies looking to automate phone-based customer support. However, these systems have frequently caused frustration among customers due to their limited functionality and confusing menus. To address these issues, insurers are turning to digital assistants, powered by advanced AI and natural language processing. By leveraging human-machine interaction technology, insurers can provide customers with personalized, intuitive, and immersive experiences. To achieve success with this technology, insurers must focus not just on the technical aspects of implementation but especially on how it can transform their interactions with customers. Figure 2 offers a comprehensive overview of the potential impact of conversational AI technology on the various stages of the insurance customer life cycle. By examining the four key stages, IDC provides insights into the implementation time frame, key use cases, ROI impact, and cost/complexity associated with each stage. This provides a valuable overview for insurers seeking to understand the value of implementing next-generation customer engagement technology. As organizations progress through the customer life-cycle stages, both the ROI impact and the cost/complexity of implementation tend to increase. Therefore, insurers should strategize and develop their own implementation road map based on their unique digital transformation and AI maturity and customer experience strategies.

In sum, this paper provides a comprehensive overview of conversational AI insurance programs through each phase of the customer journey, from awareness through claims management.

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