AI is coming to disrupt the insurance industry. From Ping An in China to Lemonade in the US, companies across the globe are harnessing AI technologies to drag the sector into the 21st century.
As with the transformations that are taking place in other financial services verticals, data-driven start-ups have been among the first to fully embrace AI. But their success has served as a wakeup call to more established industry players, who have been quick to develop their own capabilities.
“By the end of next year, AI and machine learning will take a major part of the quoting system,” says Alan Luu, AVP of Advanced Digital Analytics at Chubb. “All the major insurance companies will either be there or must catch up – otherwise, they’ll be way behind.”
Automating Underwriting Decisions with AI
AI typically generates ROI through automating complex processes or decisions that were previously performed by humans – and this rule holds true for the insurance industry.
While AI is already used by some insurers to handle fraud detection when customers make claims, Luu anticipates that the greatest impact of AI will be on the underwriting process itself in 2020.
“One of the biggest changes, and it’s going to have a major impact on the business we do, is using AI and machine learning to predict the questions and answers needed for any particular segment,” he explains. “Traditionally we’ve relied 100% on the information that is given by the client and also the experience of the underwriter.”
“We expect revenues to increase by at least 5% in the first year, just by pre-filling the data” – Alan Luu, AVP of Advanced Digital Analytics, Chubb
Chubb already has an internal system in place designed to allow its small commercial business unit to provide policy quotes within minutes. In time, Luu plans to launch similar systems across the Chubb portfolio.
AI is Unlocking New Insurance Data Streams
Using algorithms to automate underwriting and fraud detection processes will only work if the data being fed into them is correct.
As such, some data leaders who focus on segments that sell high value insurance policies are less bullish about using AI to automate decision-making. But AI still looks set to play a key role in the future of risk assessment and management for these segments.
“I feel that there are two strategies out there,” says Shajy Mathai, Analytics Technical Officer at AIG. “There’s using AI for the curation of data and then there’s using AI and machine learning in creating the data itself.”
“I think the strategy is going to be some mix of the two,” he continues. “There are certain characteristics that AI is going to be good at measuring, such as square footage or roof condition, and there are certain things it may not be able to get good at.”
“There’s a lot of companies right now playing into the computer vision space to enhance data,” he adds. “So, there’s a lot of money going in.”
“I feel that there are two strategies out there. There’s using AI for the curation of data and then there’s using AI and machine learning in creating the data itself” – Shajy Mathai, Analytics Technical Officer, AIG
What’s Next for Insurance Industry AI
The data leaders who attended our recent Risk Intelligence roundtable in New York all agreed that AI will play a key role in the industry’s future.
While some insurance companies lack the resources to develop AI capabilities in-house and other tools are still in development, the benefits of embracing AI technologies are clear and well-understood.
Most insurers are still in the early stages of automation. But the industry is on a journey towards AI-driven digitization. In property and casualty insurance, 16% are already using AI to deliver real-time, personalized transactions, according to 2018 research from Capgemini & Efma.
As the industry’s data and analytics leaders rush to bring AI-driven capabilities to market, it’s clear that those who drag their feet will simply be left behind. Meanwhile, those who can rollout AI capabilities effectively will achieve a significant advantage over their competitors.
This is an excerpt from our Future of Insurance Data report, published in association with Pitney Bowes Software. Claim your copy today for even more insights into how AI is transforming the insurance industry.