The AI powered insurer

Artificial Intelligence (AI) is all around us, from Siri to self-driving cars to facial recognition. The U.S. leads the way in self-driving tech, machine learning and natural language processing, whilst China leads on facial recognition and surveillance (where regulation is no barrier to entry).

The current generation of narrow AI performs specific tasks or functions that can outperform humans when it comes to routine activities. They are designed and built to imitate the brain's natural learning process. These AI systems create artificial neural pathways mimicking the plasticity that separates humankind from every other species on the planet.

In other words, the AI powered machine can work things out like we do (but without getting tired, hungry, lazy or emotional). Which means that for the AI powered insurer, they can work things out on a scale and speed that is either unachievable or unaffordable at a human level. Such as reading the world’s library of academic research to identify emerging risks (see Praedicat) or providing a 24×7 customer service bot on Facebook Messenger to automate claims handling (see Spixii’s work with Zurich).

AI-driven pricing makes it easier to sell insurance

From Cuvva to Trov to Lemonade, the InsurTech start-ups have shown that it is entirely possible to automate risk rating and premium pricing, and do it in a way that is quick, efficient, effective, convenient, as well as 100% digital.

Take Lemonade for example, an InsurTech favourite of mine and the subject of several posts. As Daniel Schreiber, their CEO and founder once said, “we have bots instead of brokers, and an app instead of paperwork.”. Which is why they can write personalised cover in less than 2 minutes using AI bot Maya and settle claims just as fast using AI bot Jim.

AI surveillance will improve the claims experience

The automated Lemonade solution is a great example of the future for the handling of some claims, but not all. There are many cases where customers will want to talk to another human being (not an AI-powered bot).

And for these digital customers, insurers are going to have to make the claims experience so much better than it is today. I like the direction of travel of Dave Stubbs, the co-founder and visionary behind InsurTech claims platform RightIndem. 

“making a claim should be like having a chat with a friend down the pub”.

Augmenting reality with AI and machine learning

Data has always been at the heart of the insurance industry when it comes to understanding and assessing risk. Now, AI enabled surveillance offers insurers a perspective on risk at a granular level.

Take health insurance, typically a single point in time, blunt instrument assessment of a customer’s state of health. The cover may run for many years without ever reflecting any changes in the customer’s risk profile. But with technology, this will all change. Whether that is detecting early signs of Parkinson’s disease from subtle changes in the way you move around a keyboard on your computer to your smile on a selfie indicating you are suffering from a mental health condition.

For the underwriter, this knowledge would be invaluable if they had it and were able to act upon it. Although it won’t be so good for the customers who suffer adverse selection when insurers hike their premiums or refuse cover. Thankfully, the regulator and the data science community have this issue in their sights. For more on the trend towards the personalisation of insurance, read my recent article with insurance ethics guru, Duncan Minty.

Facebook and Google already have the capability for this today, but it's more likely to come out of China first, where there are no tough data privacy regulations for the tech companies to navigate.

The automation of fraud detection using AI

One of my InsurTech favourites in this space is Shift Technology. What they’ve built is a decision-making platform speci?cally designed for insurance fraud handlers to augment their capacity to detect fraudulent behaviours. This is a hybrid man/machine solution that does not replace the human fraud handler but uses the might and power of AI to replicate their deductive reasoning and apply it at large scale.

InsurTech Insights

What you have just read is the abridged version of my article - AI enabled transformation of insurance - for this month’s InsurTech Insights (now in its 3rd year!).

In this month's newsletter, I am joined by KPMG’s Paul Brenchley and Kaushik Raghunandan who write from the perspective of AI enabled sales and service, from improving sales performance to providing greater service closer to the customer.

These themes and many more will be discussed on the free to attend webinar from The Digital Insurer on the 30th April – The AI powered insurer.

The author, Rick Huckstep, is the Chairman of The Digital Insurer, an early stage investor, keynote speaker and advisor to technology startups.