Conversational AI Explained

A Guide for Business Leaders in Regulated Industries

Table of Contents

Understanding the Basics:

Conversational Artificial Intelligence (AI) is a transformative technology that enables computers and machines to interact with humans in a natural and conversational manner. The rapid rise to prominence of ChatGPT has demonstrated the ability of conversational AI to engage in coherent and contextually relevant conversations which has captivated business leaders and ignited curiosity, driving further exploration of the vast possibilities of conversational AI.

In regulated markets such as insurance and healthcare, it is essential for business leaders to understand how to leverage the potential of conversational AI and its applications without falling foul of industry regulations. This guide provides an overview of conversational AI, its benefits, use cases, and how businesses can use it to enhance customer experience, drive operational efficiency, and improve overall business outcomes, while addressing concerns about hallucinations from generative AI.

Understanding Conversational AI

Woman using a Conversational AI chatbot on cellphone

What is Conversational AI?

Conversational Artificial Intelligence, or conversational AI, refers to the use of AI technologies such as natural language processing (NLP), machine learning, and large language models (LLMs) to enable machines to understand, interpret, and respond to human language in a conversational manner.

What is the Difference Between Generative AI and Conversational AI?

Generative AI and conversational AI are related but not the same. Generative AI generates new content based on patterns, while conversational AI focuses on creating AI systems for interactive conversations with humans. Conversational AI involves additional technologies like natural language processing and understanding to enable meaningful interactions. So, while generative AI is part of conversational AI, they are not synonymous.

What is the Difference Between Chatbots and Conversational AI?

Although chatbots are a subset of conversational AI, there are important distinctions. Chatbots typically follow predefined rules or decision trees, while conversational AI systems leverage machine learning algorithms to learn from user interactions and generate more adaptable and contextually relevant responses. Unlike traditional chatbots, conversational AI systems can comprehend and generate human-like responses, providing a more engaging and interactive user experience.

What are AI-Powered Chatbots?

AI-powered chatbots combine the capabilities of conversational AI with the practicality of chatbot solutions. These chatbots utilize advanced AI techniques to understand user intents, context, and sentiment, enabling them to provide personalized and contextually relevant responses.

What is an Enterprise Conversational AI Platform?

An enterprise conversational AI platform is a software solution that allows businesses to deploy and manage conversational AI systems at scale. These platforms provide tools for training, customization, integration, and analytics. 

What Problems Does Conversational AI Solve?

Conversational AI solves problems related to customer engagement, accessibility, operational efficiency, skills-shortages, and personalized interactions. It enables businesses to handle a high volume of customer interactions, provide instant support, and deliver tailored experiences 24/7. Many of the benefits and potential use cases can be found later in this guide.

What is an Example of conversational AI?

The OpenDialog platform is an example of an enterprise conversational AI, fit for use within regulated industries such as healthcare and insurance. The OpenDialog platform has been developed by industry-leading AI experts and enables the creation of highly sophisticated and compliant customer experiences that are quick to build, easily managed and scaled, and embrace the latest advancements in AI.

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Applications of Conversational AI

Conversational AI has a wide range of applications across various industries. Here are some key use cases:

Customer Support and Service

Conversational AI revolutionizes customer support by providing instant assistance and resolving queries in a conversational manner. AI-powered chatbots can handle a high volume of customer interactions, ensuring 24/7 support and reducing the need for human intervention. Conversational AI systems can also understand customer sentiment, detect frustration, and escalate complex issues to human agents when necessary. 

Personalized Recommendations 

Conversational AI systems can analyze user data and behavior to provide personalized recommendations and suggestions. By understanding user preferences and purchase history, businesses can offer tailored product recommendations, increasing cross-selling and upselling opportunities. For example, an insurance provider can process an enquiry, provide a quote and transact on a policy with the correct level of cover. 

Advanced Virtual Agents for Business Operations

An advanced virtual assistant is an artificial intelligence-powered software program designed to interact and assist users in a conversational manner. It can perform various tasks, such as answering questions, providing information, scheduling appointments, and executing commands, all through natural language conversations. 

Market Research and Surveys

Conversational AI platforms can be used to conduct market research and gather valuable insights from customers. By engaging users in interactive conversations, businesses can collect feedback, opinions, and preferences, helping them make data-driven decisions and improve their products or services.

Benefits of Conversational AI for Businesses

Implementing conversational AI brings numerous benefits for businesses. Here are some advantages:

Improved Customer Experience

Conversational AI systems offer a more natural and intuitive way for customers to interact with businesses. By providing personalized, timely, and contextually relevant responses, conversational AI enhances the overall customer experience, leading to increased satisfaction and loyalty.

Increased Accessibility

Conversational AI enhances accessibility by providing a more inclusive and user-friendly interface. It enables all individuals to interact with businesses more effectively. Conversational AI can assist users with visual impairments, cognitive disabilities, or language limitations, ensuring equal access to information and services.

Enhanced Operational Efficiency

Automating customer support and service through conversational AI reduces the workload on human agents, allowing them to focus on more complex and value-added tasks. Businesses can handle a higher volume of customer interactions efficiently and reduce response times, resulting in improved operational efficiency.

Increased Customer Engagement

Conversational AI platforms enable businesses to engage customers in interactive conversations, fostering a sense of personal connection. By delivering personalized recommendations, relevant content, and proactive assistance, businesses can enhance customer engagement and build stronger relationships.

Cost Reduction and Scalability

By automating repetitive tasks and reducing the need for human intervention, conversational AI can significantly reduce operational costs. AI-powered chatbots can handle multiple conversations simultaneously, enabling businesses to scale their customer support and service without incurring additional expenses or being limited by skill shortages.

Multilingual Support

Multilingual conversational AI provides businesses with the benefit of engaging and serving customers across different languages and regions. It enables businesses to deliver personalized and seamless customer experiences regardless of language preference. With multilingual conversational AI, businesses can expand their global reach, improve customer satisfaction, and tap into new market opportunities with ease.

Reduce Cost of Operations

Reduced reliance on human resources by removing up to 83% of human interactions

Automation of labour intensive manual processes

Execution of tasks at machine speed


Improved buying journey and purchase completion rates

Enablement of effective upsell strategies to increase average order values

Creation of new products and services

Improved Customer Experience

Consistent engagement across multiple channels

Faster execution of requests with higher accuracy

Available 24/7/356 across multiple regions and languages

Enhance Brand

Personalized engagement

Contextual user experiences

Easy and consistent support of brand values

Implementing Conversational AI in Regulated Markets

Implementing conversational AI in regulated markets requires careful planning and consideration. Here are some key steps to follow:

Choosing an Enterprise Conversational AI Platform

Selecting the right enterprise conversational AI platform is crucial for success. Consider factors such as NLP capabilities, integration options, scalability, and customization. 

In regulated industries such as insurance or healthcare, organizations will also need to consider the transparency of the generated responses. The ability to understand and explain the outputs of generative AI systems is critical for compliance within regulated industries. Businesses must be able to justify their decisions, demonstrate fairness, and avoid biases or discrimination in AI-driven processes. 

Explainability allows the company to identify potential errors, correct them, and ensure that customers and stakeholders can comprehend the reasoning behind specific outcomes. Responses by the OpenDialog platform are transparent and clearly explainable so companies in regulated industries, such as insurance and healthcare, can ensure conversations are compliant.

Accuracy of Information

Hallucinations, or the generation of misleading or false information by AI systems, are a concern in regulated markets. OpenDialog’s unique conversation engine mitigates this risk by enabling businesses to have granular control over the responses. This fine-grained control ensures that the AI system generates accurate and reliable information, maintaining the integrity of the conversations.

Integration with Existing Systems

To leverage the full potential of conversational AI, integrate the platform with your existing systems such as customer relationship management (CRM) tools, knowledge bases, and databases. This integration ensures that the AI system has access to up-to-date and relevant information to provide accurate responses.

Training and Customization

Train the conversational AI system using your own data to make it contextually aware and aligned with your business objectives. Customize the system to understand industry-specific terminology, product details, and company policies. Regularly monitor and update the AI models to improve their performance over time.

Data Privacy and Security Considerations

Ensure that the conversational AI platform you choose adheres to strict data privacy and security standards. Encrypt sensitive customer data, implement user authentication mechanisms, and regularly audit the system for potential vulnerabilities. Comply with relevant regulations and ensure transparent data handling practices.

Skills Shortages and Impact on Human Workforce

Conversational AI can address skills shortages of knowledge workers by automating repetitive tasks, allowing workers to focus on higher-value activities that require specialized expertise. By leveraging conversational AI, businesses can streamline workflows and increase productivity, mitigating the impact of skill gaps. AI-powered chatbots can provide instant access to information and guidance, enabling employees to quickly acquire knowledge and bridge gaps in their skill sets. Additionally, conversational AI can capture and preserve institutional knowledge, ensuring that critical expertise is available even when experienced employees are not present, further mitigating skills shortages.

While it offers efficiency, there is worry about job displacement. A balanced approach is crucial, combining AI with human interaction. Instead of full replacement, AI can handle routine tasks, allowing human agents to focus on more fulfilling and complex interactions. Businesses should prioritize upskilling to equip their workforce for the changing landscape, providing opportunities for growth. This enables a harmonious coexistence between conversational AI and human workers.

Examples of Conversational AI in Action

Conversational AI in the Insurance Industry

The insurance industry utilizes conversational AI to enhance customer experience and streamline processes. AI-powered chatbots assist customers with policy inquiries, claims processing, and policy renewals. These chatbots provide personalized recommendations, guide customers through complex insurance terms, and offer support during the claims process, improving customer satisfaction and operational efficiency.

Conversational AI in the Healthcare Industry

Conversational AI is transforming the healthcare industry by improving patient care and streamlining administrative processes. AI-powered chatbots can assist patients with appointment scheduling, medication reminders, and answering common medical questions. Conversational AI systems can also analyze medical records and assist healthcare providers in diagnosing diseases and recommending treatments.

Want to see Conversational Artificial Intelligence in action?

Check out our case studies to see how OpenDialog AI solves real-world problems for businesses.

How OpenDialog Enhances Conversational AI in Regulated Markets

OpenDialog stands out as a conversational AI platform for regulated markets, providing unique features and benefits:

Transparency of Outputs from Generative AI

Built with transparency in mind, OpenDialog specializes in building conversational AI solutions for businesses in regulated industries. OpenDialog analytics provides clear explanations for decisions, and makes the reasoning behind specific outcomes easy to understand from the perspective of every stakeholder. The platform enables regulated businesses to trace and analyze interactions with customers which aids in compliance efforts, regulatory audits, and addressing any disputes or concerns that may arise.

Ensuring Compliance and Avoiding Hallucinations

OpenDialog’s conversation engine offers businesses unparalleled control over the responses generated by the conversational AI system. It allows for granular customization, ensuring compliance with regulations and avoiding hallucinations. Businesses can tailor the AI system’s output to their specific requirements, providing accurate and reliable information to customers to maintain their integrity and mitigate risks associated with hallucinations.

Challenges and Limitations of Conversational AI

While conversational AI offers immense potential, there are challenges and limitations to consider:

Language Understanding and Natural Language Processing

Understanding and interpreting human language accurately can still be a challenge for conversational AI systems. Ambiguities, slang, and contextual nuances can affect the accuracy of responses. Ongoing advancements in natural language processing techniques are addressing these challenges, but there is still room for improvement. OpenDialog enables businesses to access the most powerful NLU engines currently in the market, combine them and adapt their use based on the required context.

Contextual Understanding and Personalization

Conversational AI systems need to accurately understand and maintain context during conversations. Personalizing responses based on user preferences, previous interactions, and current situations is crucial for delivering a seamless and engaging user experience. Achieving a high level of contextual understanding and personalization requires robust AI models and well-curated data. OpenDialog’s context-first approach to conversation design, harmonious systems integrations and diligent onboarding process ensure a best-in-class, hyper-personalized interaction between businesses and their customers. 

Ethical and Legal Considerations

As conversational AI becomes more pervasive, ethical and legal considerations arise. Conversational AI systems must respect user privacy, handle sensitive data securely, and operate within the boundaries of applicable regulations. Transparency in data handling practices and clear user consent mechanisms are essential for building trust and maintaining ethical standards. 

Future Trends in Conversational AI

The field of conversational AI is evolving rapidly, and several trends are shaping its future:

Advancements in Natural Language Processing

Ongoing research and development in natural language processing techniques will lead to more accurate language understanding, sentiment analysis, and context-awareness. Conversational AI systems will become more proficient in understanding and generating human-like responses, improving overall user satisfaction. OpenDialog’s architecture allows for seamless integration with future updates of language models. This ensures that businesses using OpenDialog can benefit from the latest advancements in conversational AI without disruption.

Integration with Internet of Things (IoT) Devices

Conversational AI will integrate with IoT devices, enabling users to interact with their smart homes, vehicles, and appliances using natural language commands. Voice-activated assistants will become the central control hub for managing and controlling various IoT devices, creating a seamless and intuitive user experience.


Conversational AI is a game-changer for business leaders in regulated markets, enabling them to improve customer experience, operational efficiency, and scalability. Embracing conversational AI can help you stay ahead of the competition and unlock new opportunities for growth and innovation. By leveraging advanced conversational AI platforms like OpenDialog, businesses can navigate the complexities of regulated markets while ensuring compliance, avoiding hallucinations, and providing exceptional customer interactions.

How Conversational AI Can Help You

Discover how OpenDialog Conversational AI delivers better experiences and communication to customers, agents, and employees by using natural language powered text and voice Chatbots, Voicebots and intelligent Virtual Assistants.

By requesting a demo, you will get access to a personalized showcase of how OpenDialog Conversational AI
is positively impacting real-world engagement and customer experiences.

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