Can Artificial Intelligence Revolutionise the Insurance Industry?
Artificial Intelligence (AI) allows a computer to access data and use that to predict outcomes. It also has the potential to respond with a relevant action without additional human involvement.
AI can make processes run more smoothly, with no margin for human error and huge scope for intelligent targeting of services for customers. The insurance industry is an ideal candidate to benefit from the application of AI. Deloittes 2018 Insurance Industry Outlook has predicted that worldwide spending from the insurance sector on AI and Cognitive Intelligence (CI) will reach $1.4 billion by 2021; a 48% increase.[i] Many experts suggest that companies that do not invest in this disruptive technology may find themselves left behind – so insurers need to be careful not to miss opportunities.
Targeted marketing and customer retention
86% of companies believe that AI will make their marketing strategies more effective in their interactions with customers. [ii] AI can combine data from a number of spheres - including social media and accessible data from current policyholders. It can build up a local knowledge using statistics of the neighbourhood and predict likely preferences based on demographics. AI can use this information to draw conclusions and then target individuals with packages that are ideal for them. In this way, marketing can be honed for each individual. This strategy is especially useful for giving existing customers targeted marketing – very important as customer retention is far less expensive than generating new custom.
At a basic level, AI can be used to automate services for policy purchases and calculating risks.
As technology becomes more sophisticated it is possible to imagine that the Internet of Things [iii] (IoT) in conjunction with AI may be able to assess risk with far more accuracy that the questionnaire style data gathering that is currently used. Questionnaires are time consuming and rely on honesty from the policyholder answering the questions. IoT and AI walk very much hand-in-hand, with it being predicted that by 2019, 100% of successful IoT technology will be supported by AI. [iv]
As IoT becomes more widespread, AI may be able to establish how well someone drives; the speed, braking distances, hours of driving and even the areas of town that are most commonly frequented by a driver. In this scenario, AI would then be able to analyse the data, calculating the risks to the vehicle and driver, producing a corresponding car insurance premium to perfectly fit that individual.
House insurance could be revolutionised by IoT assessing how much time someone is home; whether they always turn their alarm on; how many smoke detectors are fitted – as well as analysing the latest crime statistics for the street.
IoT with AI may lead to a future change in underwriting by gathering real-life data for each individual rather than basing premiums on general statistics in conjunction with questionnaire responses.
There are a number of ways in which Artificial Intelligence can speed up claims processes, making claims run more smoothly and giving human counterparts more time to spend on investigating claims or dealing with customer complaints. An intelligent, automated service for an initial claim can be completed in minutes. There is technology being developed whereby an AI can assess a photograph of a vehicle and conclude (to a certain degree of accuracy) whether the vehicle is salvageable or not. At this stage a human claims expert would still need to respond to the claim too, but the AI can categorise claims, speeding up the process and allowing staff to prioritise claims. [v]
Making the claims process more efficient is of great advantage for a number of reasons. Being efficient is of immediate financial benefit and also makes the client happy, increasing customer retention.
Systems using Artificial Intelligence have been developed that can stop around 85% of cyber attacks. [vi] It is reasonable to predict that in the future, systems may be improved upon to be in excess of this. Recent years have seen various large corporations involved in embarrassing scandals because of stolen data through cyber attacks. To preserve their reputation, companies are keen to do all that they can to ensure security and an investment in AI is one good way to move forward with this.
[vi] Jyoti Agrawal. 2017. 10 AI Stats That Will Blow Your Mind | Socialnomics. [ONLINE] Available at: https://socialnomics.net/2017/10/18/10-ai-stats-that-will-blow-your-mind/. [Accessed 10 January 2018].