Last Updated 4/3/2023

Issue: Chatbots are computer programs or simple artificial intelligence (AI) systems that can conduct natural-sounding conversations with humans via textual or auditory methods. Chatbots have been in use for many years for performing small tasks such as reporting the weather or ordering food. With extensive recent developments in AI, chatbots have broadened their capabilities and numerous companies now use them to perform essential tasks, including customer service operations and human resource functions. By 2025, the chatbot market is expected to reach USD $1.25 billion globally.

Chatbots have become common in the U.S. insurance industry. They are able to provide customers with efficient service when responding to quick and common requests, such as passwords, policy copies, and billing questions. Chatbots are able to speak to and understand people to a degree that feels nearly human, allowing them to personalize and automate multiple processes and enhance the relationship between the insurer and the policy holder. 

Background: The world's first chatbot, named Eliza, was designed in 1966 by Joseph Weizenbaum. Today, chatbots are used extensively as the technology has become widespread and easier to obtain. Some of the most popular chatbots being used today include Amazon's Alexa, Google's Home, Apple's Siri, Microsoft's Cortana, and recently, more advanced large language model AI's, like ChatGPT. These artificially intelligent chatbots are replacing real-life personal assistants to help customers accomplish certain tasks. For example, one can use any of these chatbots to instantly schedule reminders, set alarms, play music, control a smart home, answer questions on a variety of topics, and more.

The capabilities of chatbots have grown from using pre-programmed scripts to using AI to communicate with the end user. A new generation of chatbots has the ability to understand and converse in hundreds of different languages. This useful tool allows businesses to expand their current local market to different countries, with varied languages and an entirely new customer base. Companies are also able to develop "skills" for chatbots. A skill is an app that connects to the AI's platform and manages a specific cluster of knowledge. In 2016, Liberty Mutual developed skills that allow Amazon's Alexa to answer user questions, provide auto insurance estimates, connect users with insurance agents and provide advice on managing risk.

Many insurers see chatbots as an opportunity for a new approach to customer service, as well as streamlining the purchase and claims processes. According to a 2019 LexisNexis survey, more than 80% of large U.S. insurers have fully deployed AI solutions in place including the research and development of chatbots. These bots are being used widely within insurance companies for underwriting assistance, agent advisory services, and on-boarding assistance for human resource teams. In the U.S., more than forty insurers have incorporated chatbots into their daily business.

Chatbots are improving the customer experience by helping customers explore and purchase policies, check billing, make payments, and file claims quickly. InsurTech company, Lemonade has reported that its chatbots, Jim and Maya, are able to secure a policy for consumers in as little as 90 seconds and can settle a claim within 3 minutes. In addition, chatbots are available around the clock and are able to work with thousands of users at once, eradicating high call volumes and long wait times. With chatbots being integrated in multiple messenger apps (Facebook, Slack, Twitter, etc.) it is easier than ever to contact an insurer.

Status: The NAIC tasked the Innovation, Cybersecurity and Technology (H) Committee to provide a forum for the discussion of innovation and technology developments in the insurance sector, such as the artificial intelligence and chatbots, in order to educate state insurance regulators on how these developments will affect consumer protection, insurer and producer oversight, and the state insurance regulatory framework.