Artificial intelligence and its impact on insurance industry
Source – indianexpress.com
An insurance start-up recently settled a claim within a few seconds. Another insurance-tech company offers insurance based on selfies! Sounds futuristic, or fake? It isn’t, it reflects a better future for both people buying insurance and companies offering risk products. Like food delivery, banking and cab- hailing apps, technology – or more specifically – artificial intelligence, is set to disrupt your insurance buying and settlement experience, forever.
The good news is that this disruption is likely to be hugely advantageous for you. The better news is that it will also be a win for insurance companies. It will save them money, help them assess risk more accurately, prevent damage before it happens and process your claim very fast.
Understanding AI and Life Insurance
If all this sounds too complicated, consider this. What if someone says that Mr Gupta is like Mr Subramaniam, who, in turn, is like you? Let’s narrow things down a bit more. In the eyes of your insurance company, your neighbour – whose weekend binges are legendary in the neighbourhood – is the same as you, someone who doesn’t drink or smoke. Sounds unfair, right? This may be a bit of a stretch, but, it does reflect reality. In the absence of enough data about you or every individual whose risk they cover, insurers run analytics to aggregate people into risk groups. They then charge a similar premium from each risk group. This is advantageous to those who take more risks in life and
disadvantageous to those who end up paying an extra premium even though they live relatively safer lives.
Let’s consider more scenarios. An honest family that has suffered a tragedy wants to claim the assured amount on term life insurance – a product that these days provides a big safety umbrella for a reasonable premium. This honest family wants the claim to be processed fast to tide over a looming financial crisis. However, insurance companies can take a few days’ time, and this is not because they do not want to settle the claim. The companies take time to assess if the claim is fraudulent – the industry faces several dubious claims each year. As a result, even honest claims take time to be disbursed.
Let’s take another scenario. What if the site of an accident or specific actions post an incident are critical to how a life insurance company pays out the claim? What if there were help at the time of the accident or real-time assessment of the incident to not only process the claim faster, but also assess damage more accurately? Sounds good, right?
How artificial intelligence works?
Artificial intelligence through a variety of tools – right from machine learning to text analytics to video/image analysis is all set to address the problems mentioned above and many more. For instance, the availability of more data about you – through wearable devices such as fitness bands or sensors in your car/home or even more data through ‘smart city’ technology will help insurers come up with a more realistic assessment of you and the circumstances around you at a given point of time. This can also happen through data mining of your social data and medical history. This is great news because if you live a safer life, don’t drink or smoke, exercise regularly and don’t indulge in risky behaviour like driving without a seatbelt, the insurance company would be able to offer you the same cover at a much lower cost.
The same applies to the settlement of life insurance claims. There is the possibility of insurance companies using drones for quick assessment of an accident site to judge the circumstances for a claim. Smart devices can warn a user about a riskier situation even before the insured enters one. The ideal scenario for any family is to not reach a stage where tragic circumstances require an insurance claim. More data and connect with you through IoT (Internet of Things) devices, image recognition, video analysis also help establish identity, thereby considerably reducing the possibility of fraud in insurance claims. This means, faster processing of claims, something good for a grieving family.
What more data – specific to you – means is that no proxies are used for you to evaluate the risk you face. It also means that the insurance buying experience itself becomes smoother. Ultra-smart chatbots can now engage in conversation with you, answering unending questions specific to you, perhaps much better than an old-world insurance agent. Personal identity can also be verified much faster helping you sign up and take an insurance policy online, in a few minutes. The great thing that it will bring is the evolution of insurance products specific to a need – in the world of auto insurance, for instance, artificial intelligence will enable the concept of pay-per-mile car insurance.
All this is also good news also for insurance companies, which, in turn, can be good news for you. A more accurate assessment of risk will help insurance companies charge more or avoid clients with higher risk profile – thereby saving more money to cover you. Lower fraudulent claims again leave more money for you in the insurance pool. Faster processing of insurance purchases and claims saves insurance companies money, that can translate into lower cost of premiums.
All this use of artificial intelligence, of course, will take some time to come. But, this future is not very far away or unreal. What we are looking at is a complete disruptive transformation for both the insured and the insurance company. What could be better than technology enabling this win-win situation?