What opportunities does AI offer insurers and how could your insurance company take commercial advantage of them?

Olly Segger, 23 January 2020

As a concept Artificial Intelligence (AI) is nothing new and it’s certainly never far from the headlines given it is constantly being championed as one of the key drivers behind Industry 4.0, the much anticipated fourth industrial revolution.

As a concept Artificial Intelligence (AI) is nothing new and it’s certainly never far from the headlines given it is constantly being championed as one of the key drivers behind Industry 4.0, the much anticipated fourth industrial revolution. 

As AI edges closer towards daily use, there is no doubt it will play a huge part in the continuing development of the insurance industry.  Companies are already attuned to the fact the volume of data AI will bring to life will allow them to revolutionaries their underwriting and claims handling and give their customers an almost instantaneous service.

With regards to underwriting and pricing many experts believe that by 2030 manual underwriting will have almost ceased to exist for most personal and small-business lines.  In its place will be an automated process underpinned by machine learning models powered by an enormous volume of internal and external data sets.  These models will pretty much make the first round of decisions for underwriters and even begin to package the range of products a client may need.

Not only will this save time and increase accuracy and efficiencies, it will also provide the insured with total transparency regarding the decision making processes and provide insurers with a way to differentiate themselves from their competitors so that their customers’ purchasing decisions will no longer be based solely on price.

On the claims side it’s expected technology will almost take over. 

Algorithms will assume responsibility for receiving, acknowledging and processing new claims (not to mention make it more likely that discrepancies and irregularities are spotted) while data and drones take control of supplying evidence and more sophisticated automated customers service applications allow immediate access to updates on the status of a claim.

From the client’s perspective AI should make purchasing insurance faster and easier and reduce both their and their insurer’s need to be personally involved in the creation of new policies.  Meanwhile, blockchain enabled smart contracts will take care of the legal obligations and payments which again will only serve to make the whole process even easier and more secure for the client.

While all that may look a little daunting, it’s imperative that insurers aren’t left behind.  In terms of what you need to do we’d suggest the first thing is probably to consider the potential effect the main technologies are likely to have on the insurance your clients will need and on the way you provide that cover. 

The following are some of the technologies you may want to consider:

1. Open source data

As more and more data is collected, the likelihood is more and more of that data will be opened up to industry.  If insurers can access more data on specific risks and cross-reference and confirm those records with the records held by other industries, it should make for more accurate risk assessment and, by extension, more profitable premiums.

2. Connected wearable devices

The ubiquity of fitness trackers, home assistants, smartphones and smartwatches could provide insurers with an abundance of instantly useable real time data.  For example, if you were to connect a fitness tracker to a live actuarial system it could instantly calculate a more accurate life insurance premium based on the level of physical activity the individual does rather than on what they say they do.   

3. 3-D printing

The number of 3-D printed products on the market is growing and within the next 10 years it is predicted to mushroom.  This will transform the way commercial insurance products will have to assess the level of risk associated with the way they are manufactured and sold.

4. Robotics

Robotics is another area expected to grow quickly, both in terms of take up and in the number of sectors it will be used by.  Drones, self-driving cars, self-operating farming equipment and even surgical robots are all expected to be in popular use within the next 20 years so carriers will need to recalibrate the way they insure their usage and provide new types of cover should they fail to meet customer expectation or worse.

5. Cognitive technologies

When the public thinks of AI they’re probably actually thinking about cognitive technologies.  These are the programmes that allow computers to think like humans.  While there are obviously countless applications for cognitive technologies for insurers one of the primary applications is likely to be the ability to interpret huge amounts of data to predict future behaviours and industry trends so that insurance products can be designed and readied for launch before they’re needed.

In terms of what you need to do now from a more practical perspective we’d suggest the following four steps may give you a good start:

  • Make sure you are familiar with the all available technologies and have a plan to stay abreast of new developments
  • Begin to develop an AI strategy setting out what you want to achieve and by when
  • Audit the data you hold (and the data/sources you’ll need to acquire to achieve your AI strategy)
  • Ensure you have the right people and the right technology/IT infrastructure in place from the off.

About the author

Olly Segger Enterprise Account Director

Olly Segger
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