Chatbots are making their mark in the insurance world

7 October 2021

Chatbots are an efficient and cost-effective way of communicating with customers 24/7 via their preferred channel. In simple terms, a chatbot is a computer program that simulates human conversation, allowing people to interact with digital devices as if they were communicating with a real person. 

In the insurance world, chatbots are increasingly being used to answer frequently asked questions, automate claims processing, create personalised quotes and send notifications to policyholders. Chatbots can also be used to onboard policyholders and for policy renewals; as well as to provide a useful platform from which to sell insurance products. Not only are these nifty little programs boosting insurers’ bottom lines, but policyholders are benefiting from the associated efficiencies and cost savings.

“Using chatbots as an insurance distribution channel means that savings generated through automation of the sales, issuing of documents and claims processes can be passed back to consumers,” says Walter Cronje, Executive, Guardrisk General Insurance.

Cronje cites the example of the CarSure chatbot, which was created by Guardrisk in partnership with Root to enable travellers to indemnify themselves against unforeseen   liability excess payments when damaging a rented car. CarSure uses its WhatsApp chatbot to ask the client a few simple questions relating to the rental period, the stipulated excess amount and the car rental booking number. Within seconds the premium is calculated, the client has the opportunity to accept or reject the offer and leaves the rental office with cover in place – without having signed a single document or having spoken to anyone.

Insurance products that require simple underwriting are best suited for digital channels. This would include some types of life insurance, critical illness, disability, funeral and device insurance cover. In other words, if underwriting decisions can be based on questions like age, gender, amount of cover and other simple yes and no questions (for example, do you smoke?), a chatbot may be the ideal platform for the product. Chatbots also offer a valuable source of lead generation and enable offers to be personalised to suit individuals’ specific needs.

According to AI-Driven Sales Automation: Using Chatbots to Boost Sales, a paper authored by Christian Hildebrand and Anouk Bergner from the University of St. Gallen in Switzerland, a chatbot configured “to engage in more natural dialogue compared to traditional media is a critical ingredient for fostering a more enjoyable, trusted user experience”. Their research indicates that not only can a personalised chatbot sell products, it can also upsell too: 55% of respondents indicated willingness to trade up to a more costly car rental option with a personalised chat bot; compared to 49% with a neutral chat bot and 29% with a website.

More than 80% of all businesses are considering using chatbots by 2024 say Hildebrand and Anouk Bergner. The two key factors that determine a chatbot’s success are the ability to engage in more natural dialogue and personalization. Companies that create chatbots that interact with users by taking turns in asking and answering questions will find it easier to garner trust. Similarly, chatbots that were able to mimic even generic consumer characteristics significantly increased their persuasion potential. Merely matching a consumer’s gender or using a similar sounding name led to increased upselling compared to traditional interfaces. With chatbots consistently showing significantly higher open rates than email and traditional mail, there is no doubt that they are going to be valuable sales and marketing tools in many sectors for some time to come. As insurers and policyholders become more and more comfortable with this type of technology for niche products, expect to see chatbots selling and upselling insurance products on a screen near you soon.