Much has been written about the impact of technology on insurance, this most traditional of industries. Artificial intelligence (AI), connected cars, drones and the Internet of Things (IoT) are all becoming integral to the insurance and automotive industries. This becomes obvious when using your car’s navigation system – an everyday action that might well lead to a chain of events few would even think of today. Let’s consider an example of what this may hold for the future of insurance:
You enter your destination into your car’s navigation system, which uses AI to calculate a choice of routes to your destination, including the fastest, safest and most fuel-efficient. It alerts you to any immediate changes in your insurance premium based on the route you might choose. You decide to throw caution to the wind and take the least recommended route because it is the shortest distance to your destination. Your usage-based insurance premium rises for the journey. Unfortunately, you go above the speed limit and end up having an accident with a more cautious driver who suddenly stops as the traffic increases. The telematics and management systems that control your car’s diagnostics quickly evaluate the damage. Your insurance company is notified and dispatches a drone to collect forensic evidence of the accident. Before you can ask “Why did I go this way?” your insurer has approved your accident claim, called a nearby auto repair shop to come tow your car away and quickly notified you of a further increase in your insurance premium caused by the accident!
Today this may sound unlikely, but such a future scenario really is possible given the rise of AI within insurance. However, there are other use cases where AI could play a much more valuable role for insurers and their customers, much sooner than many expect.
Today’s insurance firms are looking at AI expert systems to do some of the “heavy lifting” in the decision-making for underwriting insurance policies. This could include relieving agents of some of the more time-consuming demographic pattern-finding tasks and helping them make more insightful recommendations to their clients from machine learning data analysis combined with best practices databases.
AI systems can be a bit threatening to insurance employees. A Japanese company, Fukoku Mutual Life Insurance, made the decision last year to replace more than 30 employees with IBM’s Watson Explorer system. The company believes it will increase productivity by 30% and see a return on its investment in less than two years. However, regardless of the risk to job security, AI can give underwriters and actuaries faster insights from deeper analysis of big data to make better recommendations to their customers. Insurance pricing can also be calculated in real time by AI systems that can more efficiently and effectively analyze historical information, risk analysis and competitors’ pricing, so insurers can provide their customers with the most cost-effective quotes for their services.
Claim processing and fraud prevention
AI systems with advanced algorithms can help expedite claim processing and fraud prevention. Most insurers today are accepting mobile claim submissions and processing them much faster and more accurately than ever before with the help of IoT, smartphone, drone and machine-learning systems. Intelligent systems with deep learning are also more able to find patterns of fraudulent behavior quickly and reduce the amount of claims fraud. And the benefits of that real-time analysis go right back into an insurance firm’s underwriting bottom line.
What do insurance firms need to do to better incorporate AI?
There are a few things that insurance firms can consider to better incorporate AI into their daily business processes.
- Make a cultural shift
Underwriters and senior claims adjustors are really the rock stars of the insurance business. Insurance companies need to find the right way to combine AI systems that eliminate the repetitive, commoditized work related to underwriting and claims processing, with the expertise and human contact of valued employees who have been working directly with customers for years.
AI can also help improve insurer/customer relations. AI will speed decision-making, and by enabling insurers to be more responsive, customers will be happier. For example, fast access and analysis of medical records via AI makes processing healthcare claims go more quickly. In addition, being more efficient can tremendously reduce insurance underwriting and claim processing costs.
- Remove the silos
A top insurer may have as many as 19 underwriting systems that are in silos, so getting useable information from the data is nearly impossible. AI won’t magically work for them if those critical business systems are not interconnected with each other and AI systems. And, the same is true for emerging technologies such as the IoT that are already producing volumes of data from which greater customer insights can be drawn for insurers.
As the insurance industry moves into a more active role of preventing and reducing risk, businesses are positioning themselves to scale their digital capabilities by leveraging direct and secure interconnection êŸ· the private exchange of data within and between businesses. The Global Interconnection Index predicts the banking and insurance sector’s Interconnection Bandwidth capacity will grow 61% annually (see diagram below).
Source: Global Interconnection Index, a market study published by Equinix
This greater interconnection within the insurance industry will enable insurers to integrate AI and IoT, as well as other digital technologies, with their underwriting and claims systems. This will enable them to process data, analyze patterns and combine insights to more effectively advise customers on their insurance purchases and reduce fraud.
As data is an insurer’s most important asset (after their employees), interconnected AI and insurance business systems will help them select and intersect data from various silos to mine and monetize its value to grow their business and increase customer satisfaction.
To learn more about how interconnection can add value to your digital insurance capabilities, check out the Insurance Providers Digital Edge Playbook.