Are you noticing artificial intelligence (AI) showing up in more and more places recently? You may have started typing an email and had suggested words appear. Or, perhaps you were on YouTube, and an ad popped up where a young man’s voice was explaining that he is not a human but an AI-generated likeness of a human voice. Maybe you’ve even had a conversation or created a poem with a chatbot. Like it or not, AI is quickly becoming a part of all aspects of life. Soon, it will completely change how we think and act in the world of insurance.
What is AI?
Artificial intelligence is the machine-derived understanding, gathering, and explanation of information. From the introduction of search engines to the emergence of word suggestions to understanding human speech, AI continues to develop and expand into many other areas and functions. AI is now the “brains” behind self-driving cars, creative tools like ChatGPT, policing robot dogs, and your online chess game.
As the robot dogs might suggest, there’s as much concern around the potential of AI as there is excitement. Scientists have predicted it will reach the point of mimicking the perception, learning, reasoning, and problem-solving capabilities of the human mind. That said, it’s easy to believe AI is capable of revolutionizing every industry and disrupting every career in one way or another.
What Role Could it Play in Insurance?
AI could completely transform the insurance sector, as it has a great capacity to gather data and predict outcomes. According to research by McKinsey & Company, there are four AI-related trends that are already shaping the insurance industry:
#1 An Explosion of Data from Consumer Devices
Devices with internet capabilities are already being used to gather data, and more are coming down the pipeline. We’re talking about smartphones, smart watches, fitness trackers, home assistants (such as Amazon’s Alexa and Google’s Assistant), medical devices, cars, and others.
As we move toward the anticipated “Internet of Things” (IoT), there will be even more connected devices gathering data and communicating with one another. In fact, experts estimate there could be up to one trillion connected devices by 2025 — less than two years away.
What does that mean for the insurance industry? Data. And “data is the new oil.” The insurance industry has always relied on solid datasets to understand clients, assess risk, and determine pricing. This new level of data will help insurers understand client needs at a deeper level, personalize their pricing, and speed up submitting claims and other processes.
#2 Using AI to Support Business Strategy
Insurers have a tremendous opportunity to embrace AI and use it for automation and analytics. First, determine which aspects of the business could be taken over by AI and which require investments in people and adding to their knowledge and skill sets. Then create a business strategy with a built-in schedule for assessing progress and determining whether there’s a need to modify the plan and adapt.
Because of the increased availability of analytics, insurance will take more of a “predict and prevent” approach rather than “detect and repair,” as was done previously. Analytics could completely change how we engage with clients, create products, and do business in general.
Self-driving cars could reduce car accidents, IoT devices could help prevent in-home flooding, and healthcare analytics could improve health outcomes and save lives. At the same time, cars will still break down, forest fires will still happen, and tornados will still devastate some homes and commercial properties, so we know some business will continue as usual.
However, the emergence of AI will absolutely cause some major changes, including new product lines, new ways of doing analytics, and new ways of communicating.
#3 Developing a Comprehensive Data Strategy
Data is the new oil… or black gold… so keep mining. Data is invaluable for insurers, and the volume and quality of data determine how we identify, quantify, place, and manage risk. Since AI technology does best with an abundance of data, insurers must have a strategy in place for organizing internal data and securing external data.
External data is always more challenging to access and compile so that it is as complete as possible. Obtaining external data may require the direct acquisition of data assets, licensing data sources, using data APIs, and forming partnerships with data brokers. The external data can then be added to internal data to get a good idea of risk.
#4 Creating an Infrastructure That Balancing Human Talent & AI
To win with AI in the insurance industry, it’s critical to create a company infrastructure that makes the best use of human talent and combines it with AI’s data-sourcing and automation capabilities. The human talent must also be open to working with AI and have a good understanding of how it works.
Insurance companies will need to assemble a team of people with a skill set that includes technological know-how, natural creativity, and an ability to adapt to changing times and technologies. This team of professionals will include data scientists and engineers, technologists, cloud computing specialists, and user experience designers.
The company may need to plan for continuing education for its people to keep up with changing technology and compete in the industry.
Machine Learning and Underwriting
Underwriting is another significant area that can utilize AI to streamline the process. By 2030, insurers may be able to reduce the underwriting process to only a few seconds due to the machine and deep learning models built into the technology. The internal and external data sets power these models, making the whole process more efficient for both insurers and policyholders.
AI will ultimately shape every part of the insurance process, from claims to distribution to underwriting to pricing, but nothing can replace the human connection. Great technology still requires great people.
While technological advances over the next few years could wildly disrupt the insurance industry, having a positive growth mindset is essential. The insurance industry isn’t fixed and isn’t going to become irrelevant. Instead, there are as many opportunities in the industry as there will be changes. AI has great potential for supporting the insurance industry through automation, streamlining processes, sourcing data, predicting risk, and even automating underwriting. AI may make us more efficient and better at what we do.