The term Artificial Intelligence (AI) has been used far across many sectors. At the recent TINtech conference, it was clear that the insurance sector is ready to embrace the opportunities that AI brings with its arms open wide.
The challenge, however, is recognising exactly how to leverage the technology and where it will bring the most benefit.
What is Artificial Intelligence?
When the term AI is mentioned, it is often about machine intelligence. These terms refer to intelligence demonstrated by machines rather than natural intelligence, which is displayed by humans and animals.
The correct definition of AI in today’s environment is narrow AI (or weak AI).
Narrow AI is designed to perform a specific or narrow task such as facial recognition or only performing an internet search or driving a car. In the future, it’s expected that we will develop general AI that can perform multiple tasks.
To put this into context, narrow AI can perform more effectively than a human at a specific task like playing chess, whereas general AI could mimic or outperform a human in performing multiple tasks or disciplines.
Machine learning is also commonly referenced when talking about AI. While it can seem like a logical fit, the reality is that AI is not a single thing. Instead, it represents a broad field of many disciplines, ranging from robotics to machine learning.
Today’s insurance market:
The insurance market today is still controlled in most parts by large national brands with legacy product lines that haven’t diversified or change in decades. This makes the sector ripe for disruption in a similar way that the personal transportation sector has been turned upside down by Uber.
With new Insurtech entrants such as Lemonade entering the market, we are starting to see this disruption getting into its stride.
A recent report predicts that “radically safer” vehicles, including driverless technology, will shrink the car insurance industry by a whopping 60% over the next 25 years. This rise in autonomous vehicles presents an opportunity to insures:
- Cyber Security
- Product liability insurance for sensors and algorithms
- Insuring against infrastructure problems
Insurance trends you need to know about:
While disruption now appears inevitable within the car insurance market, there are also broader and more general trends to be aware of that will drive new behaviours and opportunities including :
- Behavioural Pricing: Internet of Things (IoT) sensors are now able to provide personalised data to enable dynamic pricing, allowing consumers to make a choice about their driving habits and how this impacts their car insurance premiums (known as usage-based insurance). In the life insurance market, healthier lifestyles that can be monitored via a Fitbit or similar device means premiums can be adjusted to reflect the consumers’ lifestyle
- Customer Experience: Chatbots are now part of our buying experience in most industries. Within Insurance, AI is enabling a seamless buying experience that is almost fully automated using customers’ geographic and social data for personalised interactions.
- Claims Settlement: Today claims settlement can be clunky, however, application of AI will enable the settlement and claims payment process to run smoothly after an accident, while also decreasing the risk of fraud occurring. Customers could also make decisions about whose premiums will be used to pay their claims (known as peer-to-peer (P2P) insurance)
Trust is critical
In an industry where two-thirds of consumers find the products on sale confusing, trust is crucial to successful adoption and application of AI. Therefore, a key concern when introducing new technologies will be convincing customers that automation isn’t merely a Trojan horse for denying their claims — a worry that 60% of consumers have expressed about purchasing coverage via chatbot, according to a recent survey by Vertafore.