Panelists at Carrier Management’s 2024 InsurTech Summit—AI for Everything—said the use of AI for digital payment processing in insurance could be key in unlocking better relationships, whether it’s between carriers and agencies or with consumers.

“Embracing digital forms of payment creates a better experience for everybody involved in the process of any transaction, insurance or otherwise,” said Jeff Pharis, head of product management at ePayPolicy.

Not only can this technology alleviate manual work to drive more efficiency, but it can also provide options for consumers in terms of standards of payment, he added.

“Because that payment—that initial point of payment—is already digital, by leveraging the data provided with the payment, we can then automate several of the downstream processes like recording the receipt of those payments in various accounting systems,” he said. “And then specific to insurance, we can think about the funds exchange as it relates to the carrier-agency relationship. If an agency is taking the funds, we can then automate the transfer of funds to the carrier for the net premium less their commission. Or if they’re in a direct bill model, we can automate the disbursement of commissions from the carrier to the agent upon receipt of that original transaction, and then you build AI on top of that, and there really are endless possibilities.”

Artificial intelligence used in the payment process can provide not only additional automation but also insights into the payment behaviors of consumers so the industry can refine how it works with each customer. This customization is an important piece of driving efficiency, said Maarten Callaert, chief operating officer and co-founder of Paperbox.ai. This is especially true in a digital age when consumers are expecting claims to be handled quickly.

“Insurance claims and claims payment processes are basically a very important moment of truth for the customer,” he said. “When they have a certain claim, you can see that for customers, it’s really key to be handled very efficiently in a very short time period.”

Callaert refers to the process of tailoring payment solutions to the ways customers like to interact with their insurers as “hyper personalization.”

“AI has the capability of storing different attributes, different habits of a customer, and also tries to replicate them and predict them in the next action that the customer wants to take,” he said. “Then in different processes—including the payment options—for an insurance company, the AI technology really understands how an insurance customer likes to do business, likes to work with an insurance company, and can use it in the different steps and processes.”

He says this use case is likely something the insurance industry will see more of in the future as the technology continues to evolve.

“That’s really important and something we will see more and more because large language models do have capabilities to read more structured information and to really understand the customers even more than they used to,” he said. “So, I think this is a super interesting trend and something that will create a lot of opportunities for the insurance industry.”

Fraud Detection and Prevention

However, with opportunity comes challenges. As AI technology can process large amounts of data, especially when it comes to payments, fraud is a concern, panelists said.

“When I say fraud, I’m talking about bad actors,” Pharis said. “There are really interesting use cases with AI in terms of fraud prevention.”

He said a compromised card will typically decline payment after the fraud has occurred. However, with the use of AI, a more proactive approach is possible.

“What AI has allowed us to do in the payment space is be a little bit more predictive, and so we can identify patterns that are indicative of fraudulent activity in terms of a payment, and then the system can leverage those patterns to flag transactions that are somewhat unusual in nature, evaluate the risk levels on a very granular level, and ultimately block the transactions that shouldn’t occur in the first place because they are initiated by a bad actor,” he said. “So, the sum of this is a significant improvement in security and added trust that results in increased adoption of digital payment channels because of that.”

He added that it’s the responsibility of the insurer leveraging AI to make sure it’s being used responsibly so access to consumer data is protected. This means ensuring robust information security protocols are in place and that there is awareness across the organization about what AI technologies are being used and their implications on data privacy.

“Information security isn’t just your head of InfoSec or your CIO’s responsibility,” he said. “It is everybody’s responsibility at an organization, and so that awareness is really the key piece.”

Protecting and Leveraging Data

Another important piece is understanding the data that is being input into third-party software, like ChatGPT.

“It’s critical to know what data you’re providing and make sure that it isn’t any PII [personally identifiable information] or anything like that, or if possible, masking sensitive data just to make sure that data is protected once it leaves your hands,” he said.

Callaert added that finding the right third-party providers is key, as well, which means asking questions to ensure providers are equipped for niche use cases.

“Look for the key capabilities,” he said. “Why is this third-party or this provider different from the other ones? What makes them different for this specific use case that we want to solve as an insurance company, for example?”

Pharis said that given the rapid evolution of AI technology, it can also be critical to appoint a specific person in house who is focused on staying up to date with the latest news and vulnerabilities.

“The rapid development of this technology has really highlighted that there is a ton of potential out there, but as fast as we’re learning about it, the bad actors are also learning about it and finding ways to exploit it,” he said. “Staying up to date with the latest vulnerabilities will ensure that your security posture around AI remains robust.”

Navigating these challenges will be important for insurers, as Callaert and Pharis agree that AI technology is likely here to stay.

“It is clear to us that this will be table stakes from this point forward,” Callaert said. “It’s no longer a question of whether you should employ the AI technology or if it should be part of your strategic priorities as an insurance company. It’s more a matter of how you will use it. How will you include it into your day-to-day operations? And how will it impact your back-office teams and also the payment process that you’re doing? That’s very important in order to stay competitive.”

Pharis agreed that AI will only begin to play more of a significant role in insurance as the industry moves forward.

“As we learn more about this technology and what it’s capable of, we’ll continue to find additional ways to deploy it, to automate manual processes, thereby increasing the efficiency and freeing up human capital to focus on more value-added tasks, and ultimately resulting in a better payment experience for the folks that we serve,” he said. “I’m extremely excited as a product leader to see where this technology is going to go in the next one to three to five years. I really think the sky is the limit in terms of new and cool things we’ll find to do with it.”

The full conversation is available for a limited time for free on demand atwww.theinsurtechsummit.com.