It’s an exciting time within the insurance sector at the moment, as artificial intelligence is increasingly making its presence felt.
However, there are still, some challenges ahead in terms of how insurers look to utilize AI, as well as its potential impact on consumer confidence and whether it will cause new risks to emerge.
In the UK, investment is pouring into the sector with some 40 grants, worth a total of £13 million, having already been awarded by the Department for Business, Energy and Industrial Strategy to a range of AI start-ups. This included £1,361,570 awarded to Intelligent Voice and Strenuus, in partnership with the University of East London, who have developed AI to detect suspicious patterns in phone callers’ voices when making claims.
Boosting claims performance
AI software such as this, is being tested in contact centers with the overall aim being to offer a more effective way to root out fraudsters – while also speeding up payment of honest claims. A recent case involving an insurer in the US, saw the use of an AI virtual assistant praised following an influx of claims after the California wildfires of 2018, when customers often struggled to make calls or use landlines.
But, as insurers start gaining deep knowledge about their customers, voices of concern are also being heard. Last year, analyst McKinsey referred to the ‘avalanche of new data’ with telematics in cars, the internet of things and gadgets such as Alexa providing a proliferation of information that can be of use to insurers. Yet, there are also fears about privacy and the way insurers use this data to price their policies with fears of some being priced out of the market because they are deemed to be poor risks. As an example, individuals who join a social media group for a specific health issue could potentially see this negatively impact the price of their policy.
AI is already being used in such a way in the US, where life insurer John Hancock actually offers its customers the option to wear a fitness tracker that collects data about how active they are, how many calories they burn and how much they sleep. Those deemed to be living healthily will obtain a better rate.
Risk managers have a key role
For risk managers, AI should be seen as both offering potential benefits and also potential risks. The Risk and Insurance Management Association (RIMS) recently issued a report on AI, which said that this rapidly evolving technology will mean significant change and its stark message to risk professionals was to “get with the program”.
According to the report:
“In the context of enterprise risk, the key to integrating AI is understanding your organizational strategies in terms of both the opportunity and peril that AI innovation can bring.”
It added it would also be essential to understand “the role that the volume and quality of data will play,” in AI’s implementation and being keenly aware of the responsibilities around this.
These are indeed exciting times for the burgeoning AI world as it makes its mark on insurance. But, risk managers must also remain highly cognizant of ethics. The term “ethical AI” is gaining momentum and matters such as where someone lives, their gender, race and a host of other factors are now used to treat some unfairly – this could ultimately present an opportunity for insurers and their risk advisers to show they have their customers’ interests at heart.