AI is HOT
Artificial intelligence (AI) is HOT right now. In 2016, AI and Internet of Things (IoT) start-ups raked in half of all global insurance technology investments, according to Accenture. Many insurers are optimistic that AI will be able to quickly help them automate processes that currently are performed manually, draining financial and human resources.
AI offers a few tantalizing, and perhaps surprising, benefits for insurers.
- It can help increase customer engagement and retention in a low-touch industry by generating offers that are personalized to specific customers and presented at the right time in the sales cycle.
- Robotic process automation (RBA) can help lower insurers’ costs. Japanese insurance firm Fukoku Mutual Life Insurance replaced 34 staff members back in January with an artificial intelligence (AI) system that can calculate insurance payouts. At the time the move was announced, BBC Asia said the company expected to save around 140m yen (£979,500/$1.2m) a year in salaries after the 200m yen system was installed.
- Financial Times cites some higher-level benefits, such as using algorithms to analyze policy details to see if customers should switch policies, combining The Internet of Things with AI to increase customer stickiness and proactively solve problems via AI (predict and prevent car accidents, etc.).
Analyst firm Novarica is bullish on the technology’s long-term impact:
Insurers are in the early stages of catching this wave. Artificial intelligence eventually stands to disrupt existing analytical models and methods within the insurance industry, especially pertaining to underwriting, customer service, claims, and actuarial science.
AI’s benefits will only be reaped, however, by insurers who first take care of one crucial step…
Not So Fast
Reporting on an AI panel discussion held at the Global Insurance Symposium in Des Moines, Iowa, Digital Insurance’s editor-in-chief, Nathan Golia, noted that participants arrived at a general consensus on what insurers need to do before capitalizing on AI.
Insurers are keen to adapt artificial intelligence in the enterprise, but first they must build up a layer of data and analytics excellence.
Panelists also discussed the importance of “fast data” and quick decision-making.
Not All Advanced Analytics Systems are Created Equal
To work effectively, AI will require easy access to troves of sorted data provided by an effective business intelligence (BI) system, as well as other types of unstructured data. With today’s rampant privacy concerns, though, it is also necessary to obtain the consent of the customer to store his/her sensitive data and to use an advanced analytics system that can delineate sensitive from non-confidential data.
Sapiens’ recent white paper describes how pre-integration enables insurers to receive information from wearables or their customer engagement platform, and then quickly begin inputting that new information into their marketing efforts, so they can adjust strategy based on tangible data and trends.
Hype or Reality?
Artificial Intelligence is generating a lot of hype in the industry, but it will remain a buzzword until insurers first get their data and analytics in order.