Insurance is the latest industry to see an acceleration of digital innovations that are transforming…
June 15, 2018|
The waves of cutting edge technologies have not missed the property and casualty insurance sector. The most recent wave penetrating all aspects of the industry are the explosion of artificial intelligence (AI) and big data analytics applications. Insurance AI is seeing platforms aimed at the front lines and the back office. They can help reduce risk and forecast the future bringing more reliability to planning at all levels of the business.
Venture investments in Fintech, including InsurTech startups, are on the rise again in Q1 2018 at $5.4 billion, with the U.S. seeing a 38% increase since the previous quarter. Investment focus has been mostly on retail banking but significant interest is shifting to insurance, with AI Insurance a vital feature, with an increase in quarterly investment rising from $463 million in Q4 2017 to $645 million in Q1 2018. Investors search for unicorns, the survivors who go on to become behemoths. But each new InsurTech startup, both the winners and the losers, adds to the advances getting built into the Insurance industry’s next generation.
Some early attempts have yielded interesting results using AI and behavioral economics.
While it may be a few years until AI is standard in every type of insurance business, AI has been in development for decades. With the advent of cloud computing and access to formerly-siloed, ferreted away data stores has enabled new uses for older AI tech. The use of deep learning has become a catalyst for creating intelligent systems through the use of huge insurance data stores. Previously, gaining insights from data was a costly and time consuming investment, limited to highly specialized teams.
When AI is paired with deep learning and large cloud-based data stores, carriers can develop, test and refine hypotheses and scenarios without the time and cost of the current approaches. Studies that now take weeks to derive simple analyses can become virtually instant, and with trivial cost. With the proliferation of new insights, carriers will be able to turn to improving their ability to make decisions and persuade.
Right now carriers use a few, broad categories and proxies to make guesses about risk and how to price that risk, not truly knowing the price of a product until after the term. By putting AI into action, data becomes actionable information. AI and machine learning tools let insurers go beyond prediction, to evaluate human behavior. By using an ever expanding list of data sources and the sophisticated tools, new information is brought to light. Determining risk more precisely, anticipating purchase readiness and attrition are just the beginning. Delve deep to find what prices, incentives, discounts and product configurations will be popular, and match against risk to find out which will be most profitable and which will not.
Hippo Insurance uses AI-enabled online quotes to make sure the sales process is a friction free as possible. Farmers Insurance uses a advanced big data analytics on their smartphone app developed by Driveway Software to measure distracted driving and other driving behavior safety factors, reward drivers with a discount for better driving. Results have shown that just by priming drivers minds with measurement and regular feedback, their driving risk goes down.
By connecting AI and data analytics, understanding behaviors allows insurers not only to reward those policyholders that already follow safe behaviors but encourages others to make the choice to change and gain rewards as well, improving the outcomes for the group overall, and lowering expenses for the insurer. AI has the capability of refining patterns and predictions to see which offerings and conversations perform well. The good news is that this is no longer science fiction or locked away in academic laboratories. The rapid growth of Fintech and InsurTech startups has brought these tools to the carrier’s doorstep. These tools can help drive insurance transformation, taking it from a business focused on risk prediction to one of risk reduction.
To see how Elafris Virtual Insurance Agents can help your company, speak with us to schedule a free online demo.