Artificial intelligence in insurance: science fiction or the next big thing?
Artificial intelligence or AI is one of the emerging technologies that is part of the so-called ‘4th Industrial Revolution’ (along with augmented reality, Big Data, ‘everything as a service’, 5G and more). In the most narrow sense, no one has achieved true AI yet, which would be the creation of an artificial consciousness capable of or exceeding human intelligence and self-awareness.
In a broader sense, AI is already here. What technology specialists mean by AI today is mostly an accelerated analysis, pattern recognition and predictive analytics based on loads and loads of data (please go read our Big Data blog post if you’re not sure what this is). And this type of AI is already changing the insurance industry, so AI is neither science fiction nor the ‘next’ big thing.
Here are some ways in which AI is disrupting insurance:
- One of the promises of driverless cars is a great reduction in accidents. How can insurers respond to this? In addition, will insurance shift from the now disempowered driver to the vehicle manufacturer or the provider of the driving software? What will these new pricing models and premiums look like?
- Machine learning and analytics can provide a lot of insights into consumer behavior, for instance via data gathered by Internet of Things (IoT) and wearables. Riskier behavior can be spotted much earlier and well before a potentially bad client can sign on an insurance and cause losses. Conversely, customers with behavior that is unlikely to cause future trouble could be offered loyalty discounts or bonuses.
- AI may even hold the key to better predict natural disasters. Consider how far science has advanced in accurately predicting the weather. Insurers could use these new insights to play a more pro-active role in dissuading people and businesses to engage in potentially lethal risks, such as buying an asset in a zone that is likely to be damaged by heavy storms in the next 5 years.
- Other types of insurance contracts may emerge, e.g. per-usage contracts. In the past, accurately predicting how much any given consumer would use their car was a guessing game. Now, through constant data gathering, this becomes easy.
Of course, one caveat here is that these uses of AI bring some privacy concerns with them. Laws are still playing catch-up and may limit insurers’ ways of turning AI to their advantage. On the other hand, insurance companies right now still have a great advantage over individual customers: they already have loads of data. So why not begin using those data today?
If you’re interested in how AI could help advance your company, feel free to drop us a line and discuss your ideas or concerns with us. At Oxygen, our mission is to make insurers succeed in the current tech revolution, and we would love to hear from you.