Forbes Deep Dive: Four AI Applications Transforming Health Insurance and Unlocking a $3.5 Trillion Industry

In 1970, Americans spent $74.5 billion on healthcare—equivalent to $448 billion in today’s dollars. By 2017, driven by the presence of Medicare and Medicaid, spending on healthcare by patients, healthcare providers, and pharmaceutical companies had surged to $3.5 trillion.

According to data from the non-profit Council for Affordable Quality Healthcare, a total of 6 billion insurance transactions are required to maintain the proper functioning of the U.S. healthcare system (an increase of 1.2 billion from 2016). This translates to nearly 11,450 new policies issued per minute.

For insurance companies, the entire medical insurance system is relatively complex. Can the integration of artificial intelligence (AI) technology help the insurance industry control rising costs and handle large volumes of complex, tedious tasks? VCBeat (WeChat ID: vcbeat) has compiled a relevant article published by Forbes, aiming to provide an in-depth analysis of the development prospects of “AI + Medical Insurance.”

First, artificial intelligence can help insurance companies reduce costs. A recent study by Accenture shows that by streamlining administrative processes, insurers can leverage AI technologies to save $7 billion within 18 months. Specifically, for every 100 full-time employees, health insurance companies can save $15 million simply by automating routine tasks.

Moreover, artificial intelligence can help insurance companies improve consumers’ overall health. Christer Johnson, Principal for Healthcare Data and Analytics Advisory at Ernst & Young, stated, “We are seeing a growing number of insurers investing in artificial intelligence to deliver better customer experiences and continuously improve patient health outcomes.”

Health insurers have recognized the potential of artificial intelligence (AI) technology and have already taken action. According to an Accenture survey, 72% of health insurance executives stated that investing in AI will be one of their top three strategic priorities for the coming year.

Although leaders in the health insurance industry continue to focus on long-term cost savings and improvements in patient health, artificial intelligence has already exerted a certain impact on the entire sector. Specifically, the technology-driven transformation can be categorized into the following four areas.

As China’s largest insurance company, ZhongAn Insurance offers services such as medical insurance applications, benefits inquiries, and medical claims processing. Customers can communicate directly with an AI-powered chatbot. Data shows that customers interact with the AI chatbot 97% of the time, resorting to human customer service representatives only for the most complex issues.

In the future, AI-driven customer interactions will become the norm rather than the exception. A McKinsey report indicates that by 2030, chatbots will serve as the primary point of contact for most insurance customers. Compared with 2018, the volume of human customer service interactions is projected to decrease by 70% to 90%.

An Accenture survey found that 68% of insurance companies are currently using chatbots across various aspects of their operations. By leveraging artificial intelligence to manage customer interactions, health insurers can save more than $2 billion annually.

Torben Nielsen, Vice President of Innovation and Strategic Investments at Premera Blue Cross, stated, “Health insurance customers are increasingly accustomed to this model of human–machine interaction. After conducting extensive research on user experience, we found that a growing number of people are highly willing to adopt such technological solutions rather than communicate directly with humans.”

Premera is the largest health insurance company in the Pacific Northwest, serving nearly 2.2 million members. In 2017, the company launched Premera Scout, a 24/7 chatbot that helps customers quickly access information about claims, benefits, and other Premera services.

Torben Nielsen explained, “What members want is a personalized experience. Artificial intelligence enables us to access complex data and derive value from it in a more personalized manner.”

Major health insurers such as Cigna and Humana are also leveraging robots to deliver services. Cigna launched the Answers chatbot, which uses natural language processing to understand and respond to more than 150 frequently asked questions, while providing personalized benefits information. With the introduction of the Answers chatbot and the Digital One Guide service platform, Cigna’s customer satisfaction rose by 20% in 2017.

“Although robots currently handle basic customer interactions, Torben Nielsen predicts that ‘in the future, robots will access customers’ personal health information and identify overlooked gaps in healthcare. Ultimately, they can provide customers with customized, data-driven health guidance.’”

A McKinsey study shows that insurers typically flag 8 out of every 10 health insurance claims as potential fraud. This means that up to 80% of claims must be reviewed by adjusters, a process that consumes significant time, money, and manpower.

However, artificial intelligence is transforming the way claims are handled across the entire insurance industry, as algorithms can detect anomalies within seconds, rather than taking days, weeks, or months.

“For years, claim acceptance or rejection was primarily based on hard-coded, established rules within processing systems,” explained Johnson from Ernst & Young. “Now, technicians are beginning to embed more machine learning models that can consider multiple factors, rather than relying solely on rigid, fast-and-dirty rules.”

The Coalition Against Insurance Fraud stated that fraud detection is one of the most heavily invested areas in the process of introducing artificial intelligence technology into the insurance industry. In 2016, more than 75% of insurance companies used machine learning algorithms to identify health insurance fraud.

Faster Fraud Detection Means Faster Processing. A Singapore pilot project led by Prudential plc demonstrates that artificial intelligence has reduced claims processing time by 75%, cutting the turnaround from nine days to just 2.3 seconds.

However, Johnson found that AI automation in claims processing is slower than many people imagine, due to constraints from various factors, such as collecting and organizing unstructured data from different sources like hospitals, doctors' offices, and pharmacies.

Many large insurance companies are exploring how to leverage artificial intelligence solutions to prevent the onset of diseases. Meanwhile, they are also investing in technology startups, planning to utilize their innovative analytical technologies.

For example, in 2017, Premera Blue Cross invested in Cardinal Analytx. This healthcare AI startup, incubated by Stanford University, leverages predictive models to recommend interventions before patients become ill or experience other medical emergencies.

Torben Nielsen stated, “Cardinal Analytx can very accurately predict when patients will develop serious health issues, thereby avoiding major and complex complications. At the same time, this technology also helps us reduce costs.”

Similarly, Cigna has also invested in Prognos, a company that applies artificial intelligence to laboratory diagnostics. By analyzing a database containing 14 billion medical records, Prognos can predict when customers are most likely to visit the emergency room or undergo hip or knee replacement surgery, and can accurately diagnose depression three months in advance.

Early intervention offers numerous benefits, particularly for patients with chronic conditions. Citing research from the Centers for Disease Control and Prevention (CDC), Christer Johnson stated, “Currently, approximately 75% of healthcare expenditures are associated with chronic diseases, such as non-terminal cancer and diabetes.”

Johnson further explained, “Predictive analytics based on various indicators—such as patients’ online searches for symptom information or visits to specialists—can forecast impending adverse events. By implementing early interventions, insurers can proactively provide appropriate medical services.”

“For individuals with chronic diseases, artificial intelligence enables them to receive instant prompts and then seek assistance from healthcare providers or insurance companies. We can see that if help is sought at the right time, patient engagement can increase by more than 800%,” said Johnson.

In 2014, Progressive Insurance launched a mobile application for its Snapshot program. By leveraging artificial intelligence to analyze millions of data points—such as speeding, hard braking, and texting while driving—the app offers premium discounts to compliant drivers. Major insurers such as Allstate, State Farm, and Nationwide have also introduced similar incentives based on telematics data, saving customers billions of dollars in premiums.

In this process, auto insurance companies have also saved billions of dollars in accident compensation costs. Related studies show that vehicle telematics can reduce speeding incidents by 60%, and for young drivers, this technology can lower the rate of major accidents by 35%.

Given the widespread adoption of wearable sensors, such as Fitbit, and the tracking of health data via smartphones, customer behavior-based insurance models appear to be an inevitable choice for health insurance.

Torben Nielsen stated, “We can see that some insurance companies have already begun to experiment with this model, such as incentive programs based on step counts.”

In 2018, U.S. insurance giant John Hancock announced it would stop underwriting traditional life insurance policies and sell only “interactive” policies that track health data via smartphones and wearable devices. The company’s CEO, Brooks Tingle, explained to The New York Times: “The longer people live, the more money we make.”

However, Torben Nielsen emphasized that “behavior-based insurance models in the health insurance sector are still in their early stages of development. At present, industry stakeholders remain uncertain whether such models should be further promoted.”

As for consumers, they appear highly willing to exchange personal data for cheaper insurance. A survey of 1,194 U.S. consumers conducted by Troubadour Research found that nearly half were willing to provide their biometric data to health insurers in return for premium discounts.

As large health insurers focus on behavior-based insurance models, some insurtech startups have already developed related products.

BioBeats and FitSense are leveraging artificial intelligence to process data generated by fitness wearables, thereby delivering personalized employee wellness programs. Other AI-driven health insurance startups, such as Collective Health, Bind, and Oscar, are also innovating continuously to launch more personalized products.

Torben Nielsen believes, “These technology companies will benefit all health insurers and their customers. The entry of startups into the health insurance market will have a positive impact, as they bring fresh perspectives that enable us to gain a deeper understanding of our core competencies and ensure that the healthcare products we develop are aligned with future trends.”

Ultimately, the shift toward personalization will fundamentally transform the traditional business model of health insurance companies. For a long time, insurers’ coverage has been based on risk pools constructed using statistical sampling. Now, artificial intelligence can help them mine vast datasets in real time to predict the health status of individual consumers (rather than groups).

Torben Nielsen stated, “Natural language processing, robotics, and machine learning—these artificial intelligence technologies can not only help insurance companies improve efficiency but also create a better experience for consumers, enabling them to lead healthier lives.”

References:

https://www.forbes.com/sites/insights-intelai/2019/02/11/can-ai-cure-what-ails-health-insurance/#254431d12d59