Artificial intelligence, usually known as AI, is becoming part of everyday life. It can recommend films, answer questions and help detect suspicious activity online. It is also changing how the insurance industry works.
A 2024 survey by the Bank of England and the Financial Conduct Authority (FCA) found that 95% of responding insurance firms were already using AI. However, this does not mean computers are taking control of every insurance decision. In most cases, AI is used to support people, speed up routine tasks and analyse information.
So, how is AI used in insurance, and what could it mean for customers?
What is artificial intelligence?
AI is a term used for computer systems that can carry out tasks that would normally need human thought. This may include:
- Finding patterns in large amounts of information
- Making predictions based on previous data
- Reading documents or images
- Understanding written questions
- Creating text or summaries
AI is not the same as ordinary automation. Automation follows a fixed set of instructions, while some AI systems can learn from data and adjust how they respond.
How is AI used in insurance?
Insurance firms may use AI in several parts of their work. The exact technology and level of human involvement will vary between companies.
Helping with customer enquiries
AI-powered chatbots and virtual assistants can answer common questions, guide customers to the right information or help them find documents.
This may reduce waiting times, particularly outside normal working hours. However, a chatbot may not understand every situation. Complex or sensitive questions may still need to be handled by a person.
Supporting insurance quotes
Insurers already use information such as a customer’s age, address, vehicle, claims history or property details when deciding whether to offer cover and how much it should cost.
AI can help insurers study this information, identify patterns and assess risk. It may also help them process quote applications more quickly.
AI is only one part of the process. Insurance prices can be affected by many factors, and different insurers may calculate risk in different ways.
Speeding up insurance claims
Some AI tools can read claim forms, sort documents or review photographs of damage. For example, an image of a damaged vehicle could help a claims team decide what type of inspection or repair may be needed.
This can help simple claims move forward more quickly. Claims involving serious damage, unclear evidence or unusual circumstances are still likely to need closer human review.
Detecting possible fraud
AI can look for unusual patterns across claims and applications. It may flag information that does not match or activity that is similar to known types of fraud.
A warning from an AI system does not automatically prove that fraud has taken place. It can instead help trained teams decide which cases may need further checks.
Improving services
AI can help insurance firms understand which parts of their websites or services customers find difficult. It may also support tools that simplify information or make services more accessible.
The Association of British Insurers says responsible AI could help improve the affordability, accessibility and availability of insurance. It also warns that firms must consider risks such as bias, unfair treatment and exclusion.
What are the possible benefits of AI in insurance?
When used carefully, AI may offer several benefits:
- Faster answers to straightforward questions
- Less time spent processing forms and documents
- Quicker progress on some claims
- Better identification of suspicious activity
- Services that are easier to use
- More time for employees to focus on complex cases
AI may be especially useful for repetitive tasks involving large amounts of information. This does not remove the need for people. Human knowledge, judgement and understanding remain important.
What are the risks?
AI can be useful, but it is not perfect.
Incorrect information
Generative AI tools can produce answers that sound convincing but are wrong or incomplete. Customers should not rely on a public AI chatbot to confirm whether something is covered by their policy.
Your policy schedule, certificate and policy wording are the main documents to check. If anything is unclear, speak to your insurance broker.
Bias and unfair decisions
AI systems learn from existing information. If that information contains gaps or unfair patterns, the system may produce results that disadvantage certain customers.
Insurance firms must monitor their systems and make sure customers are treated fairly. AI should not be trusted simply because it can process information quickly.
Privacy and data security
Insurance can involve sensitive personal, financial and medical information. Companies must protect this data and explain how it is used.
Avoid entering policy numbers, payment details, medical information or other private data into public AI tools. Only provide personal information through trusted and secure channels.
A lack of human understanding
AI may struggle with unusual circumstances or situations that require empathy. It may recognise words and patterns without fully understanding what a customer is experiencing.
Under UK data protection rules, safeguards apply when a significant decision is made solely through automated processing. These include providing information about the decision and allowing the person affected to request human involvement or contest it.
How can customers use AI safely?
If you use an AI tool to help you understand insurance, keep these points in mind:
- Use it for general explanations, not a final decision about cover.
- Do not share sensitive personal or policy information.
- Check important answers against your policy documents.
- Make sure the information you provide for a quote is accurate.
- If your circumstances change, tell your insurance broker.
- Ask for an explanation if you do not understand a quote, claim or policy decision.
- Be careful with unexpected messages, links or payment requests, even if they look professional.
AI can also be used by criminals to create convincing emails, images and voices. If you receive an unexpected insurance message, contact the company using the details shown on its official website or your policy documents.
Will AI replace people in insurance?
AI is more likely to support insurance professionals than remove people from the process completely.
The Bank of England and FCA survey found that only 2% of reported AI uses in financial services involved fully autonomous decision-making. Many systems were designed to assist employees or involve human oversight when a decision was important or unclear.
People will continue to play an important role in explaining cover, reviewing complex claims and supporting customers who need extra help.
What does the future look like?
AI is likely to become more common across financial services. The FCA believes it could improve access, personalisation and efficiency, while also creating risks involving fraud, cyber security and consumer harm.
For customers, the most useful changes may be simple ones: quicker responses, easier processes and clearer information. However, trust will depend on AI being used fairly, safely and with suitable human oversight.
When arranging insurance, it is still important to understand what you are buying. If you are looking for cover, One Call Insurance can help you explore your options and check the key policy details before you make a decision.
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