Why Artificial Intelligence is transforming the insurance industry
Artificial Intelligence (AI) started to become a very hot topic in 2018. Companies are increasingly focusing on the possibilities of artificial intelligence. The integration of AI by large companies has grown by 270 percent in the past four years, according to research agency Gartner. In 2018 alone, the integration of AI applications has tripled: 37 percent of companies now use artificial intelligence in one way or another.
The 4 main reasons why AI became so popular
1. Massive amounts of data are being collected by companies. According to the McKinsey Global Institute, the volume of collected data by companies continues to double every three years as information pours in from digital platforms, wireless sensors, virtual reality applications and billions of mobile phones. A report from IBM states that 90% of the data in the world today has been created in the last two years alone, at two quintillion bytes of data a day.
2. Processing power has skyrocketed: According to Intel, their chips can now run over 10 trillion calculations per second. To give an idea of the scale: If you had a dollar bill for each calculation and then stacked those dollar bills on top of one another, the stack could go to the moon and back, and then get halfway back to the moon again.
3. Algorithms: Algorithms are used to solve input problems based on accessible data and operational parameters. Big tech companies now publish their research algorithms (pre-trained models) that can be re-used (the so-called transfer learning).
4. Frameworks or software development kits: AI used to be very inaccessible, but due to the development of various libraries and frameworks, it scares fewer people off and actually became a more accessible practice.
Ninety-eight percent of insurance executives believe that cognitive computing will play a disruptive role in the insurance industry.Start leveraging from AI now
In the insurance industry, AI already made its first appearance. Several insurers have implemented AI applications such as chatbots/AI assistants, behavioural premium pricing, text classification, P&C claims processing and many more. Ninety-eight percent of insurance executives believe that cognitive computing will play a disruptive role in the insurance industry. Here are some examples of how AI is changing the insurance business in Belgium and abroad:
1. In January 2018 Generali Belgium launched a first AI application for Europe: The Generali Quick Quote Car. This is the first digital application in Europe that is able to calculate annual premiums on the basis of an image of the vehicle. By uploading a photograph of the vehicle, along with the driver’s age and by using geo-positioning and number plate identification, the Quick Quote calculates the annual premium within 60 seconds.
In October 2018 the Generali Quick Quote for Renters was introduced. By using geo-positioning and by entering a few simple parameters, an insurance broker can use this tool to create an offer quickly and send it directly to their customer through the app.
In the first phase, the application of the tool was just for apartment tenants. In the second phase, it will be extended to other categories such as fire insurance (owners, houses, …).
2. AI in the form of computer vision, is used by Ageas within the claims process. Thanks to the enormous increase in computing power, AI can be used to analyse images and photos. Algorithms analyse photos of damaged cars and a few seconds later the computer shows which car parts need to be fixed and which parts could better be replaced entirely. A computer can do this much quicker and much more consistent than the human eye.
3. At Ageas for example, they use AI within the marketing department. AI-technology can be an alternative for the more traditional client segmentation, as it offers the possibility to bring the right product at the right moment and through the right channel to the customer. At Ageas, predictions are made based on client data that is shared with their partners. If, for example, a customer took a loan for a car 4 years ago, he will probably be thinking about buying a new car. This way, marketing becomes much more predictable and efficient. And clients don’t get overloaded by irrelevant offers.
AI has opened up numerous promising opportunities, but it has also led to new topics for discussion. In the future, we will face a range of legal and ethical dilemmas in the search for a balance between considerable social advances in the name of AI and fundamental privacy rights. Facial recognition is now used at concerts for security reasons and in China, police officers use AI-powered eyewear on the street with facial recognition to identify suspects. The potential impact of AI on privacy is immense and this is why it is imperative to raise awareness about these issues. If self-driving cars become widespread, society will have to face an ethical dilemma: How should the vehicle be programmed with preferences about which lives to prioritize in the event of a crash. Human drivers make these choices instinctively, but algorithms will be able to make them in advance. So will car companies and governments choose to save the old or the young? The many or the few?
AI went from a buzzword in 2018 to reality in 2019 and it will continue to solve business problems and bring new ideas to life as insurance companies strive to get the most business value and competitive advantage from their existing data.
At thewave, we combine a profound knowledge of the insurance industry with new technologies to build practical solutions for insurers and brokers. Feel free to contact us via email@example.com for more information.