< Study Room | 04.01.2017

CAN ROBOTS HELP INSURERS?

CAN ROBOTS HELP INSURERS?

The reality of super-intelligent robots is moving ever closer and, as The Journal explores, opportunities to make use of artificial intelligence in the insurance sector are growing.

Artificial intelligence (AI) is rapidly becoming the biggest issue on the agenda for many businesses, according to some expert observers. The speed of development, the sheer range of possible applications and the potential impact suggest it is time for CEOs to pay attention.

Futurist Rohit Talwar, CEO of Fast Future Publishing, says there are 10 questions every CEO should be asking:

 

1 What is the fuss about?

AI will change the philosophy, practice and management of business. It is beginning to transform businesses and replace even senior management and leadership roles.

2 What is its potential?

Undertake an internal analysis of where it could be deployed and what competitors are doing. Take a broader perspective of the potential roles AI could play, from smarter production management to customer targeting and broad-based decision making.

3 How fast is it moving?

The pace of AI development has caught most unaware. We might soon see anything from robot lawyers to ultra-intelligent mobile personal assistants.

4 How deep should we take it?

Many firms are looking at relatively narrow deployments. Others are looking at much broader uses such as intelligent HR, finance and legal advisers, and real-time data analytics of live transactions.

5 Could it take the CEO’s job?

Perhaps. Some of the more extreme applications include the creation of ‘human-free’ automated businesses, where everything from strategy to operational processes are embedded ‘in the system’ – this could become increasingly common.

6 Who should lead?

AI has a much broader role and potential impact – so it should the CEO, COO or business transformation head driving the identification, piloting and application of AI solutions across all the business.

7 What would success look like?

The mantra should be to ‘fail fast and cheap’ – bringing in suppliers, customers and other value chain partners early on. There can be as much learning from a failed project as a successful one.

8 How do we preserve the feminine?

The challenge is to maintain the feminine in the human face of the organisation and avoid AI systems displaying a more masculine and ‘robotic’ persona.

9 How will staff respond?

AI is already being deployed to automate clerical, manual and semi-skilled labour, and is replacing professionals in engineering, medicine, legal and accountancy. What is your strategy for overcoming resistance and helping those displaced by AI?

10 How do we address social impact?

There is a growing concern that unemployment levels may rise – AI could replace 30%-80% of all current jobs in the next five to 20 years.

 

BUT HOW THIS IS RELEVANT TO INSURANCE?

In a report earlier this year, PwC looked at AI in insurance. It found the following benefits:

Improving efficiencies:

AI is already improving efficiencies in customer interaction and conversion ratios, reducing quote-to-bind and FNOLto-claim resolution times, as well as increasing new product speed to market.

Improving effectiveness:

Because of the increasing sophistication of its decision-making capabilities, AI will soon improve target prospects to convert them to customers, refine risk assessment and risk-based pricing, enhance claims adjustment, and more. In time, AI systems are likely to become more effective than humans and replace them. Advisers, underwriters, call centre representatives and claims adjusters will be most at risk.

Improving risk selection and assessment:

AI’s most profound impact could well result from its ability to identify trends and emerging risks, assessing risks for individuals, corporations and lines of business. Its ability to help carriers develop new sources of revenue from risk-based and non-risk-based information also will be significant.

Parker Beauchamp, CEO of US firm INGUARD, also sees major change ahead in the insurance sector. He explains: “AI is providing endless opportunities in analytics, marketing and software development for innovative professionals who are able to leverage technology effectively.

With AI, there will be a shift in the skills needed to work in the insurance industry. Techsavvy professionals must train for the future and learn to work alongside AI to reveal their true creative potential.” The job will change, he says, and insurance agents who once spent countless hours asking routine questions, submitting requests for insurance, filing paperwork and processing claims can now turn to sophisticated systems.

“For example, AI and automation allow insurers to cut down on claims processing and underwriting times significantly, and reap sizeable cost savings,” he says. “Tasks that once took months are now accurately completed in a matter of minutes, opening the gate for insurers to focus on more complex and creative projects.

Machine learning can help insurers and agents underwrite risk more effectively, using the large troves of customer data it has collected.” Consumers are now accustomed to algorithms and the use of historical behavioural data to offer sales, search and product recommendations in their day-to-day lives. This same concept can apply to insurance, as AI constantly collects data and helps identify consumer patterns to reduce risk.

However, as the recent failed attempt by Admiral to use Facebook profiles to help in its risk rating shows, this could be a difficult path for insurers in terms of reputation and customer acceptance.

INFORMATION SHARING

If used in the right way, says Mr Beauchamp, AI can build predictive models for expense management, high value losses, reserving, settlement, litigation and fraudulent claims by using complex algorithms.

He points out: “Unlike humans, AI systems share information globally in seconds. In turn, these systems constantly learn and adapt as more data is collected, thus eliminating the learning curve and contributing to the rapid growth and success of AI.” AI constantly works to better understand humans and their thought processes through machine learning, which allows AI to analyse human behaviour and provide predictive consulting based on individual wants and needs.

He adds: “For the insurance industry, AI provides predictive consulting for round-the-clock customer service. Whereas humans are unable to offer 24-hour support, chatbots provide real-time feedback and insurance consulting to deliver quality service and improve the business’s bottom line.”

Mr Beauchamp warns: “Executives must be willing to welcome AI with open arms to improve processes and deliver higher quality work. With AI technology rapidly expanding, it’s critical that insurers keep up with industry trends to avoid becoming obsolete.”

WHAT IS AI?

AI is an area of computer science that emphasises the creation of intelligent machines that work and react like humans. Some of the activities computers with artificial intelligence are designed for include:

  • Speech recognition
  • Learning
  • Planning
  • Problem solving

 

AI EVOLUTION

1943: World War II brings a new way of thinking. Mathematician Alan Turing and neurologist Grey Walter are two visionaries who tackle the challenges of intelligent machines.

1997: An IBM-built machine takes on world chess champion Garry Kasparov and wins.

2002: iRobot builds the first robot for the home – a vacuum cleaner.

2005: The military gets involved and BigDog, made by Boston Dynamics, is one of the first machines to emerge.

2008: A new feature appears on Apple phones – a Google app with speech recognition.

2010: At Shanghai’s 2010 World Expo, 20 robots dance in perfect harmony for eight minutes.

2011: In 2011, IBM’s Watson takes on the human brain on US quiz show Jeopardy and outperforms all human competition.

2014: Sixty-four years after Turing published his idea of a test to prove machine intelligence, a chatbot called Eugene Goostman finally passes. Google makes a billion-dollar investment in driverless cars and Skype launches real-time voice translation. Intelligent machines are becoming an everyday reality.

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