AI is reshaping Asia’s insurance landscape, transforming customer interactions, and optimizing business processes, leading to unprecedented growth opportunities.

In our conversation with Bambang Sueno, President-Director of PT Mitra Harmoni Insurance Broker, we discuss why AI is a ‘must-have,’ not just a ‘nice-to-have’ in 2024.

Mr. Bambang has been recognized as one of the top 10 leaders and achievers in Asia 2023 by CEO Insights, Asia, and PT Mitra Harmoni has been recognized as one of the top 10 insurance broking companies in Southeast Asia by Asia Business Outlook.

Traditional vs. Modern Distribution Channels in Insurance

Traditionally, insurers connected with customers through their sales teams or agents and brokers. The modern multichannel model offers various modes of connection, including e-commerce platforms and telesales. Insurance selling methods have evolved over the years.

However, one channel that has always withstood the test of time is the intermediary channel, which plays a distinct role in the entire lifecycle of a product. From the point of sale through policy servicing to claim processing, insurance intermediaries serve as a bridge between customers seeking to buy insurance policies and insurance companies seeking to sell those policies. In terms of figures, 98.75% of life insurance policies are sold through face-to-face distribution or intermediaries, while online and web aggregator channels contribute about 1.25%.

These numbers spotlight the importance of in-person interaction in the insurance sector. However, the use of AI has increased multifold in the financial industry. South Korea’s mobile-only bank, Kakao Bank, has established an artificial intelligence (AI) lab to provide AI-powered services and focus on research and development for new financial services. According to the bank, the AI lab will help develop personalized content for mobile banking services, including customized financial advice, product recommendations, and marketing messages based on individual customer data and preferences.

On the Role of AI in Modern Insurance

AI can play a key role in helping traditional financial institutions to exponentially improve their customer insights and deliver superior hyper-personalized experiences. Today, we are not just using terminologies like personalization but have coined new words like ‘hyper-personalization.’ AI helps us to go deeper and understand customer behavior better. Relying on such intuitive technologies can help guide strategies to improve customer engagement, infusing a vital element of skill into personalized experiences.

Let me illustrate with an example. There is an Indonesian bread seller named Pak Budi. He bakes and sells many varieties of bread daily. He faces daily questions: How many loaves should he bake? How much should he charge for each variant? Which bread variant is most profitable? When is the best time to sell his bread? Without data, he can’t optimize his profit. But with data, he can understand his market and customize his offerings accordingly.

Similarly, in insurance, data can help insurers hyper-personalize products to suit the customer’s life journey. Customer lifecycle marketing is the process of engaging prospects with the right method at the right time, and through the right medium, to guide them to the next step in the buying process. Customers go through the journey of awareness, interest, desire, action, loyalty, and advocacy. Every insurer aims for the buyer to reach the advocacy stage, where the customer is loyal and promotes the company because they are satisfied with the products and services.

Defining Customer Segmentation will optimize insurance selling.

How does AI contribute to Customer Segmentation?

AI algorithms identify and group similar customers based on common characteristics like location, age, income, interests, and purchase habits. We know that people with similar characteristics will have similar needs and will want similar products and services. AI-driven segmentation maximizes personalization, enhances customer experience, and improves cross-selling and upselling opportunities. The best example to understand customer segmentation is Netflix. The streaming platform has grown exponentially by leveraging data to predict customer behavior. Over 80% of what people watch on Netflix comes from their recommendations, which are driven by machine learning algorithms. Netflix also uses data analytics to assess the potential success of a project before even investing in it! It uses algorithms to personalize the viewing experience, increasing engagement and retention, which indirectly supports the success of their movies.

Can You Give an Example of an Insurance Organization That Has Successfully Implemented AI?

Sure. Lemonade is an American insurance company that has successfully implemented AI to increase sales. The company employs artificial intelligence for instant policy issuance, where Lemonade’s AI-powered platform enables customers to obtain insurance policies quickly and seamlessly. For claim processing, the screening process is facilitated by AI algorithms that can handle the claim submission process efficiently, including payout and fraud detection. AI algorithms play a crucial role in fraud protection and prevention at Lemonade. They also offer personalized recommendations, where Lemonade uses AI algorithms to analyze customer data and provide personalized insurance recommendations tailored to individual needs and preferences. For risk assessment and underwriting, Lemonade employs AI to assess risk and determine insurance premiums accurately.