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Three important trends of artificial intelligence in the financial and insurance industry

Three important trends of artificial intelligence in the financial and insurance industry

  • Categories:Industry News
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  • Time of issue:2019-05-13 17:25
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Three important trends of artificial intelligence in the financial and insurance industry

The moments of change are all in place, and future changes can be imagined. The insurance market has been dominated by large state-owned brands and traditional product lines, and there seems to be no substantial development for decades.
 
However, people have already started betting. In the eyes of venture capitalists, the timing of the insurance industry's subversion has matured. New York-based insurance technology company Lemonade has successfully completed the largest seed round financing in history.
 
More than just venture capital firms, Warren Buffett has publicly stated that the advent of autonomous vehicles will seriously affect the premiums of Berico's Geico.
 
There are already relevant data indicating that this is indeed the case. In a 2015 forecast report, KPMG pointed out that “extremely safe” vehicles, including driverless technology, will shrink the auto insurance industry by 60% over the next 25 years, while auto insurance accounts for the insurance industry. 40% or more. But isn't there a big benefit to automating business processes for insurers?
 
Artificial Intelligence in Insurance - Preface
 
Artificial intelligence is a trend that should be of concern to the commercial market. In this paper, we will focus on three key ways. Artificial intelligence will drive the economic income of insurance companies, brokers and policyholders, and promote the transformation and upgrading of the insurance industry:
 
● Behavioral pricing policies: The ubiquitous Internet of Things (IoT) sensor will provide personalized data to pricing platforms, allowing safer drivers to pay less for car insurance and less healthy health care for people with healthier lifestyles.
 
● Customer experience and personalized service: Artificial intelligence will realize the user experience of fully automatic seamless docking policy, and the chat robot can obtain the customer's geographical environment and social data for personalized interaction. Operators also allow users to customize insurance for specific projects or events (ie, on-demand insurance).
 
● Faster, customized claims: The online interface and virtual claims adjuster will increase the efficiency of claims and payments after an accident, while reducing the likelihood of fraud. Customers can also choose which insurance company's premium will be used to pay for their claim (called P2P insurance).
 
As a global market, insurance is often associated with public distrust, which can challenge technological innovation – whether it be artificial intelligence or other innovative ways.
 
Therefore, a key point in introducing new technologies is to convince the public that automation does not affect their policies like Trojan horses. A recent survey in Vertafore showed that 60% of consumers expressed concern about buying insurance through chatbots.
 
Three current AI application trends in the insurance field
 
We will gradually analyze these three main types of artificial intelligence application trends, compare the current state of the industry, the ongoing changes, and the future developments of the industry. First analyze the "behavior pricing":
 
First, the behavior pricing model: IoT sensors transfer insurance from the agent to the source data. IoT data provides three key ways to personalize insurance pricing:
 
● Take effective risks: Telecommunication and wearable sensor data will pay lower premiums for low-risk behaviors, such as driving less and exercising more;
 
● Bundle sales of policy and AI equipment: Smart Home will provide policy discounts to users who use AI technology to achieve bundled sales of equipment and insurance;
 
• Verification and evaluation of claims: The IoT data market will enable operators to obtain verified risk management information faster, rather than relying on costly assessments and audits.
 
Here's an example: based on lifetime or pay-per-car insurance, telematics sensors track specific assets (such as cars) in real time, and auto insurance can specify premiums for specific risk events, such as car accidents.
 
What does this mean? A safer driver can pay less for the policy and any driver can pay for the mile. Policyholders are no longer part of the risk pool – they are paying for the effective risks they bear. This is a brand new insurance product that is inseparable from the support of AI telematics.
 
Of course this approach requires the addition of remote sensor devices. This is why insurance companies are becoming hardware companies. Take Neos Ventures, for example, a company that provides smart home monitoring and emergency assistance, as well as home insurance. Their strategy is to provide a lower premium form if it can provide technology to reduce natural gas, water leaks or home unsafe event detection, but to transfer these saved costs to customers.
 
To succeed in the next 10 years of the market, insurers must quickly shift from a pricing model based on the possible behavior of the category to a pricing model based on individual actual behavior. This is what is called "migration from proxy to source data."
 
The survey shows that consumers want this shift. A recent survey by Troubadour Research & Consulting found that nearly half of consumers are willing to hand over data on wearables to insurance companies in exchange for cheaper products.
 
There are still many uncertainties in insurance-based aftermarket applications. The National Association of Insurance commission said in a 2017 report: "UBI is an emerging field, so there is still a lot of uncertainty in the choice and interpretation of behavioral data, and how to put this data Integrate into the existing price structure to maintain new market profitability, etc."
 
About one-fifth of the market is not interested in this. 21% of customers refused to participate in the UBI project survey, and 81% of the respondents did not want their driving behavior to be monitored. They did not think that this would save money or that the premium would fall. People like long commuters, who often drive long distances or who like to speed on empty roads, can hardly benefit from the insurance company's assessment of their behavior.
 
Some operators have obtained sensor data and it does not mean that they will be used. The reliability, richness, and accuracy of the source data become critical. This has spurred the origins of the platform market, such as Octo Telematics' Next Generation Platform (NGP), which provides an application platform interface (API) for auto insurance operators for driver behavior scoring, traffic accident analysis, and for fleet management and Claim analysis and risk analysis for car rental companies.
 
Any new technology has risks, and things always have two sides. Sensor data reduces risk in many ways, but it also introduces some new vulnerabilities. For example, sensor-related remote devices may be vulnerable to hackers, violating data protection, information security and other regulations. So these vulnerabilities require operators to develop new services that underwrite sudden risks.
 
Second, customer experience and personalized service: AI interface allows customers to better interact. Here are three key ways to improve your user’s insurance experience:
 
● Chatbots recognize you: advanced image recognition and social data can provide personalized sales conversations
 
● The platform will verify your identity: automatic personal authentication can reduce processing time for bindings and authentication
 
● Operators can customize services: Machine learning technology can provide real-time online or application-based shopping experience
 
In January 2017, life insurance startup Lapetus launched a self-portrait purchase of life insurance services, which made headlines. Because habits such as smoking are a strong indicator of longevity, Lapetus can quickly determine risk scores through facial analysis without the need for lengthy or cumbersome physical examinations. The company's official website explains how to assess the signs of smokers.
 
Successful e-commerce is customer-centric, and the most personalized customer experience is the most direct. This is the idea of ​​Allianz1. Allianz1 is a web platform in the Italian market where buyers can freely combine and match with Allianz's 13 different businesses to create their own personalized products.
 
According to a survey by Accenture, 68% of respondents in the insurance industry use chat bots in some of their businesses.
 
Chat bots like brands and people's names. The famous insurance chat bots are Geate's Kate and Lemonade's AI Jim. Chat bots sell business insurance through Facebook Messenger and based on customer property insurance needs.
 
Third, faster, customized claims: AI is faster to reduce claims while reducing fraud. The speed and success of claims is a key factor in the efficiency of insurance business. The two ways AI claims improve customer satisfaction are as follows:
 
● Speed ​​of Claims: Claim Time This metric is very important for customers to choose a business.
 
● Reduce the possibility of fraud: reducing the possibility of fraud will eventually become an important indicator of insurance companies.
 
The advantages of artificial intelligence seem to be most obvious in terms of claims. Lemonade's AI Jim made headlines in January 2017, and he allegedly settled a claim in less than three seconds. According to a survey by JD Power & Associates, this settlement time is the business metric that customers care most about. Compared with the company's number one insurance department, the processing period is 11 days.
 
This is an order of magnitude, and the top-ranking claims department processed claims 316,800 times longer than Lemonade's AI Jim.
 
Most insurance company executives have realized that artificial intelligence will revolutionize the industry in which they operate. A survey conducted by Accenture in April 2017 found that 79% of insurance company executives believe: "Artificial intelligence will revolutionize the way insurance companies get information from customers and how they interact with customers."
 
Whether or not there is a chat robot, this is a huge opportunity to save money. Insurance companies often expose $80 billion in fraudulent claims. The most common form of insurance fraud is identity theft, which involves theft of insurance and identity data when a policyholder unknowingly or disagrees. Data security and payment/transaction fraud occur from time to time.
 
Fraud detection is one of the trends in the application of artificial intelligence technology that cannot be ignored. Fraud detection has become one of the fastest areas in the insurance industry to apply AI technology. According to reports, in 2016, more than 75% of the industries used automatic fraud detection technology. Shift Technology, a startup that helps insurance companies prevent fraud, recently analyzed 82 million claims.
 
Conclusion: Benchmarking of Insurance Artificial Intelligence Solutions
 
Customers evaluate the performance of insurance products when they need to pay, not when they buy insurance products. Unlike other products or services, customers can only make judgments based on the services provided by the insurer at the time of the underwriting event. So, as Alex Polyakov, CEO and founder of insurance technology company Livegenic, wrote: “The most important measure in the insurance industry is customer satisfaction after the claim.”
 
Since startups such as Lemonade and Next have only a few years of history, there is currently not enough data to determine whether a high-quality customer experience can be delivered on a large scale. It is undeniable that the insurance company's customer management process is “boring” and requires major improvements and streamlining. Time will prove that these changes will be worth the money.
 
It is undeniable to buy insurance in the future with a few mouse clicks. Mike LaRocca, chief executive of the National Automobile Finance Corporation (STFC), conveyed in January 2017 the message that "the era of change has arrived. If we don't see it, it is likely to die." ”
 
People seem to have reached a consensus: the days of the insurance industry maintaining the status quo are not much. A survey conducted by Accenture in April 2017 found that "insurance executives believe that artificial intelligence (AI) will significantly change their industry in the next three years." Whether it's telematics, autonomous vehicles, chatbots or custom platforms, the market may turn to companies that can better use artificial intelligence to improve customer registration/claim management processes.
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