In recent years, chatbots have developed in two different directions. The degree of communication competence manifests itself primarily in functional skills. There are four developmental stages in language acquisition, which can lead from basic communication to personalized communication. Emotional and empathic skills are a very young field of research and are closely linked to local cultural factors. The challenge is to move from functional interaction to an independent personality. Both development directions are mostly AI-based (see illustration).

When chatbots become more functionally competent

There are also differences in the AI chatbots. Simple versions do not yet work with a developed NLU (Natural Language Understanding), but can only read individual keywords from the user input and then give a suitable answer if possible. To avoid incorrect answers, this type of AI bot is used for limited use cases where the keywords the bot needs to know are manageable.

The next step for a chatbot is to understand contexts within a dialog. This allows the chatbot to engage in situation-specific communication. This type of chatbot is primarily used when the use case cannot be limited to a single subject area. One such chatbot is used by Helvetia Switzerland.

The fourth stage of chatbots is still under development. Once they have mastered personalized communication, the chatbots learn automatically during communication. They “notice”, so to speak, whether a user was satisfied or dissatisfied with an answer; and this influences how they answer the same question in the future. The following figure provides an overview of the stages of chatbot maturity.

When chatbots should become more and more ‘human’

The qualities that make a chatbot more “human” require a brief digression into research questions around “empathy” or “compassion”, or the “ability and willingness to recognize, understand and empathize with another person’s sensations, emotions, thoughts, motives and personality traits.” (Wikipedia). The literature speaks of emotional, cognitive and applied empathy, i.e. the ability to understand an interaction and react to the situation (see also de Waal, 2007). The development of empathic chatbots is still in its infancy and has recently gained interest. This reflects current technological advances that require the ability to “feel empathically” (Wartburton, 2007), as the aforementioned empathic chatbot Wysa does in supporting mental health (Inkster et al., 2018).

It is conceivable that bots with empathic intuition will develop their own personalities that can be adapted to their brand values. This remains a big step and is not yet a commercial reality. Training emotional skills is challenging, especially as (visual) emotions are perceived and interpreted differently in different cultures (see also Ringeval et al., 2019). The maturity levels of the chatbot personality are shown in the next graphic.

The development of empathic bots is currently still exploratory in nature. The requirements for chatbots are still largely functional, and the ROI case for more chatbot empathy is not yet clear. However, empirical studies show the potential value of empathic bots (see also Naotus et al., 2020). Casas et al. (2021) have shown that empathic chatbots outperform the benchmark bot and even human-generated responses in terms of perceived empathy.

The advance of technology can also force companies to make customer interactions more “human”. It could be a balancing act to what extent empathetic aspects can be integrated into commercial chatbots.

Bots will be integrated into the value chain as a highly competent alternative interaction channel

Consumer expectations are changing. The 24/7 economy has arrived in many sectors, and this will also have an impact on the insurance industry. This always-on function can only be fulfilled through the use of chatbots. These direct customer interfaces will have to further develop their communication skills in order to enable personalized interaction. The ability of a chatbot to be empathetic and “human” could be a valuable differentiator for an insurer against the competition. In addition, the chatbot’s ability to support other channels as an alternative source of knowledge will provide further added value.

However, chatbots are still in their infancy and are unlikely to develop human empathy any time soon. The use of AI alone, with its ability to learn from customer interactions and improve services, will bring organizational challenges. Nevertheless, change will come. Consumer expectations will change, companies’ data needs will evolve, new players will enter the market with new technologies, and chatbot avatars will be ubiquitous on social media and in online retail. Those insurers that are prepared for the coming changes will be in a prime position to take advantage of them. It’s time to chat.

This article is part of an English article on the SwissRe Blog. The whole article can be downloaded here as a PDF .