Artificial intelligence adoption in the insurance industry, from carrier to agency, has gone from if to when. 2018 became the year leaders at all corners of the insurance ecosystem had to admit AI is important for the future of the business.

The question at the top of the agenda for innovation executive teams is how to select the optimum uses for artificial intelligence services. Part of the answer depends both on the specific strategies and strengths of the organization as well as a deeper understanding of the current state of AI insurance services.

Where is AI now?

Throughout 2018 insurers added artificial intelligence services to their businesses. The primary focus for most has been around tools that interact with or serve the customer directly. Two primary AI capabilities most often put to work appear in the popular AI virtual agents also known as chatbots. The past few years have seen an explosion in the number of easy-to-implement conversational virtual agents. Even the simplest of these chatbot platforms offer two mainstay artificial intelligence skills, natural language processing and conversational capabilities. While these may seem like a single domain, they involve separate disciplines. Natural language processing involves recognizing and understanding what humans are trying to communicate. This involves advanced mathematical algorithms to be able to analyze and process statements. Conversational capabilities are what makes these agents feel alive and not like a machine. Anyone who has tried to teach a baby to speak has an inkling of what this involves. Machine learning enables both the conversational capabilities of AI virtual agents and their ability to understand unique phrases.

The third go-to artificial intelligence capability that is appearing more and more in AI insurance services are the advanced data analytics the allow carriers and agencies to be more flexible in their approaches to designing products, to detect fraud and predict when policyholders will welcome offers of additional services or when they will be thinking about leaving for a competitor company.

Preparing for the AI road ahead

Artificial intelligence tools for the insurance sector no longer require million of dollars and years of integration to get up and running but this does not mean insurers should charge in all directions towards every shiny new artificial intelligence product. Three areas of caution for the coming plans for AI projects is warranted–

Understand your tools – AI can be as simple as downloading programs and adding them to your website, or you can spend heavily on custom tailored comprehensive AI systems. Some agencies choose to treat these new tools like black boxes, with little or no understanding of how things work. A better approach is to work closely with carefully selected AI technology partners to make sure necessary team members fully understand how these powerful implementations function and how they integrate with current systems.

Not enough data – Many insurers have chosen to install customer-facing AI products that need training from live data, but these agencies and carriers lack sufficient interaction data to train the automated agents to work properly. The first customers who interact with these AI products get welcomed to a poor experience, including nonsense conversations and aborted attempt to serve the client. Prudent vetting of technology partners and their products should assure that any product launched to serve customers be pre-trained and sufficiently robust so AI doesn’t lose customers instead of serving them.

Leverage what you know – Insurance companies have access to heaps of data, both their own and outside sources. Integrate these data sources with any AI projects to avoid missing out on some of the most lucrative benefits of AI product implementations. Insurtech partners should understand the complexity of the insurance data landscape and assist agencies and carriers to develop strategies to take full advantage of these new and existing data resources.

Challenges for the coming year

AI product development does not seem to be slowing down any time soon, if the level of investment in AI insurance technology startups are any indication. For the upcoming year, insurers should remember that the complexity of the insurance industry is not going away but will be changing with the coming digital transformation. The need for human experts to develop the insurance frameworks that guide these revolutionary products is ever present. Insurers who invest in creating these frameworks and building their own teams with the expertise to integrate the frameworks with the new technology will have long term returns on these initiatives. Paired with this long term investment should be investment in partnerships with technology providers who can adapt to current and future needs of each particular insurance company they serve.

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