AI sweeping changes in insurance technology
Artificial Intelligence (AI) or enabling computers to mimic human behaviour and decision-making process is no longer a distant futuristic dream, it is a forgone conclusion in the reality of the present. Advanced technology has become an integral part of our lives. Our private and public lives, the spaces we occupy, the products we consume, and the services we opt for, are all becoming more intelligent thanks to AI and machine learning based on the enormous volumes of user data being collected every day.
It is no surprise then that the corporate sector across industries is rapidly waking up to the potential and evident business value of investing in AI technology. According to a 2017 CB Insights report on artificial intelligence, the funding to companies dealing with AI was at a staggering $4.8 billion in 2016, with a projected overall spend of $47 billion by 2020. More than 85 percent of customer interactions across industries are predicted to be managed without a human by 2020, according to a 2016 Gartner study.
On an individual level too, industry giants within every sector are investing heavily on the future-altering and positive impact of AI. Google has slashed its data center energy usage by almost 15 percent by using AI technology to predict incoming computational load and adjusting its power consumption patterns based on the AI analysis. Within the financial sector, BlackRock Inc, the world’s largest asset manager, has entrusted assets worth more than $5 trillion to robotic stock pickers instead of human portfolio managers to compute data and make accurate decisions about what to sell or buy. While car manufacturing company Tesla has seen a 40 percent drop in road accidents ever since it deployed its AI-enabled safety features in cars.
While most industries are already well on their way to riding the AI wave, preparing for major disruptions in the way we do business, some industries are still lagging too far behind. Insurance is one such industry that is nowhere close to being prepared to capitalise on the world’s AI movement. Currently, only 1.33 percent companies invest in AI. As we head into a digital future, a mastery over technology that is driven by data is the only way for companies to ensure key competitive advantage, informed by unique insights into the needs and wants of tomorrow’s consumer.
But all is not lost, even though the 300-year-old insurance industry has been slow to adapt to the changing competitor landscape in the digital era, insurance executives are now waking up to the need for change and are acting with a renewed sense of urgency. According to a 2016 report by IBM Institute of Business Value, 95 percent insurance executives intend to start or continue using AI in the future, and insurance industry investments in AI have increased 69 percent — $5 billion — between 2011 and 2014.
Deterioration of traditional profit pools and changing customer expectations have opened up the playing field for InsurTech companies to come in with better business models and experiences on the back of delivering faster claim payments, greater price transparency, at lower costs and using fewer resources.
Increased VC interest in InsurTech startups is a direct indicator of data being the currency of tomorrow. With more and more data being collected — both on the macro (governmental and organisational) as well as micro (household and individual) level; a never-before-seen number of touchpoints from which to mine information — mobile devices, connected devices, machine sensors, the digitisation process; and finally, the willingness of consumers to share personal information in exchange for value or benefits, AI is becoming crucial for sustainable business growth.
Currently, 2.5 million terabytes of data are generated every day according to a 2015 Deloitte UK report. While companies have huge volumes of data at their disposal, it is valuable only when they also have the right tools to make sense of it — which is where AI comes in. Using powerful algorithms, AI makes it possible to sift through the enormous amounts of information in an intelligent and independent manner, helping insurance companies optimise existing opportunities and generate new ones.
In today’s world, AI is more than about data analysis and automating repetitive tasks. It is about turning data into knowledge and action models. To sum up, to be successful in today’s business environment, insurance companies need to leverage AI effectively by integrating a technological viewpoint into their business practices, or, in other words, a deep-rooted knowledge of what is technologically relevant and feasible today (AI) combined with an understanding of how it can be used to the organisation’s best advantage.
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