News

AI, an insurance revolution – fact or fiction?

26th Janurary 2018

Artificial intelligence could revolutionise the insurance industry. 2018 has started with a multitude of similar eye-catching headlines, so I thought it was time to wade in with our thoughts. Is this statement fact or fiction?

Why the hype?

Let’s start with a definition. According to Wikipedia, AI is “intelligence displayed by machines, in contrast to the natural intelligence displayed by humans”. However, in the context of this article, Tom Davenport, co-founder of the International Institute for Analytics (IIA) and fellow at the MIT Initiative on the Digital Economy is more helpful. In his view "About 90% of AI has a statistical underpinning." This statement underlines that, in essence, the concept is nothing new. So why the hype?

So the potential is there, but in our view AI will work alongside existing processes to improve rather than revolutionise. Bill Franks, the chief analytics officer at IIA believes companies will need to think about hybrid analytics if they want to remain competitive. Franks said "The architecture can be an insurance policy," By this he means the technology used in the future needs to be flexible, making it easy to add or get rid of tools. In 2018, analytics professionals should start to consider how well their core insurance platform will integrate with the range of tools available.

2018, time to take action

Tech-savvy insurance start-ups are already circling. They see an old-fashioned industry, complacent and still sitting on fat profits made in the past. Lapetus, a US-based start-up is an interesting example. Life insurance traditionally involves an in-depth assessment of an applicant using a complex actuarial model. Lapetus, believes a “selfie” can replace much of that. Computers are programmed to scan a customer self-portrait and analyse thousands of different regions of the face. They are looking not just for basic information such as gender but for clues about how quickly the person is ageing, their body mass index and whether they smoke. This, together with other information collected from the customer, allows the computers to calculate what Lapetus says is a far more accurate prediction of life expectancy than traditional methods can provide. And the whole process takes only a few minutes.

This is evolution. The insurance process is basically unchanged. There is an application phase, including a new element of the self portrait. There is an underwriting process, albeit it electronically using an in-depth picture analysis and then there is the final risk decision. What Lapetus does represent is the potential to speed up insurance model using the power of AI to meet the digital expectations of the new market. It should also flag up a danger signal to the traditional Insurers. Technology introduces change that is inevitable and should not be ignored.

Revolutionary? Not at this stage. AI of itself will not revolutionise insurance but it has the potential to radically improve the industry. To revisit the views of Bill Franks, a good way to start is a review of the core technology. Without the infrastructure to benefit from the capabilities of AI, Insurers will undoubtedly lose out.


Content produced exclusively for Total Systems plc, specialist providers of insurance software for quote; rating; policy administration and claims

Latest Blogs

2018

April

Is insurtech actually a thing?

March

Blockchain - not just for the techies

Feburary

Build or Buy?

Janurary

AI, an insurance revolution – fact or fiction?

2017

November

Emerging technologies – risk and opportunity

October

What does the future hold for commercial insurance?

September

Insurance is changing – time to adapt and survive

August

Does AI deserve the headlines?

May

Seeing through the eyes of the customer

April

Insurance technology – simplify the complex

March

InsurTech, ignore it at your peril!

2016

December

It’s Crystal-Ball Gazing Time Again

November

How ready are you to combat fraud?

October

Actions speak louder than words

September

Efficiency, agility, and profitability

How can you be more customer-centric?

August

Old Technologies - It is OK to plug the gaps

New Technologies - Same Old Systems

June

Running to stand still

May

Is your business ready to adapt?

March

No, seriously, what can you claim about your claim systems?

What can you claim about your claim systems?

February

It's people that have the ideas

January

Separating the Movers from the Shakers in 2016

2015

November

The challenge to be different – it’s all about the people

September

Security, Simplicity and Speed - the future of Financial Services

July

The New Breed of Quote and Rating Modules

June

INSURANCE INNOVATION SUMMIT 2015 - Hosted by Ingenin Ltd

April

Speed and Personalisation – aspiration or reality?

March

Team spirit is an illusion glimpsed in the aftermath of victory... or is it?

January

David or Goliath?

2014

December

What's your New Year resolution? Here are three of ours

November

2014 Insurance Technology Event - Championing Innovation - Hosted by Post Events

The maverick in the ranks - how do we deal with the talented non-conformist?

September

Are you Responsible, Chilled, Sociable, or Happy?

August

A Customer for Life

July

Being different

June

Cloud computing – a huge opportunity for the Insurance Industry

May

Past failure is a threat to future success

April

It isn’t broken yet - is change too risky?

March

Today’s word is ENABLE

What is Value for Money?

February

How to make vision a reality – it’s not that difficult

The Challenge IS the Opportunity

January

Instil a culture of innovation and creativity

Three steps to success in 2014

2013

December

What customers want from the Life Insurance industry

Themes from Insurance Strategy Insights event

November

The need for competition

Insight must lead to action

What is disruptive technology?

October

Closing the insurance delivery gap

September

Reliability much more important than price

August

Where has all the creativity and innovation gone?

Is there too much fear in business?

July

"Simplicity" is not as simple as it looks

Time for Innovation

Standing out from the crowd

June

Insurers need to innovate and excite - or die

May

The danger of business inertia

April

The BIG Decisions

The work/life balance

Coping with exploding data

March

Trust and loyalty go hand in hand

February

Bold and brave

January

To stand still is to go backwards

2012

December

The year ahead in Financial Services

Love it or hate it, you can't ignore the influence of Twitter

When is it better to 'start again'?

November

Differentiation is the key

October

Solvency ll - may be delayed but certainly won't go away!

Better by the bundle?

Insurance and the net

Personalised technology

September

USA leads the way

August

Technology gold medals

New is not always better

Stand still and get left behind!

July

Social media blamed for poor data flow

Banks will abandon 50 per cent of branches in 8 years