Did you know that tweets could soon be used to help insurers price premiums? That’s right! Insurance companies are looking into ways to combine social media data with artificial intelligence and predictive modeling to inform coverage among other aspects of insurance programs. Or at least that is what Paul Lucas of Insurance Business Magazine explained in his recent article!
As someone new to insurance, reading about innovative ideas such as this gets me excited for the future of the industry. I mean, it really seems like the opportunities are endless! I had a similar ‘awe-inspired’ experience after recently hearing insights from The Insurance Disrupted Conference.
It was a two-day event hosted by Silicon Valley Insurance Accelerator (SVIA) that is part of a series of conferences in 2016 focusing on disruptive innovations in the insurance space. This conference was centered around Big Data, Analytics, and Artificial Intelligence (AI) and showcased over 30 industry panellists and 15 start-up companies. While my colleague covered some high level takeaways that the insurance industry can learn from SVIA I wanted to take a deeper dive into some of the trends discussed. A few of my main takeaways from the two days are:
AI and machine learning are set to impact the entire value chain
There is a major opportunity for AI technologies to disrupt areas of the insurance industry from underwriting to policy administration, sales, claims and many more. One example of technology disrupting the value chain comes from Orbital Insight, a company that uses satellite imaging and data science to determine roofing conditions of houses. Orbital Insight cuts costs on both the front and backend by reducing the need for manual assessment and identifying trends and commonalities amongst claims. This allows insurers to pinpoint properties that present higher risk, leading to a more accurate pricing of a policy.
Commercial and specialized lines of insurance are ripe for disruption
The commercial space has been largely devoid of disruption, as the personal lines of business have mainly dominated the focus of start-ups. This Periodic Table of Insurance Tech provides a great overview of the space.
You’ll notice that life insurance occupies just over 5% of the table which also makes it ripe for Insurtech investment opportunities!
Specialized lines, such as pandemic/epidemic insurance, have historically been very difficult to price, owing largely to a lack of data and ability to quantify risk. As more data is tracked, risk will be more accurately priced, specialized lines will become more profitable, and will be poised for major growth.
Claims is the functional area that could experience the most financial savings
According to an executive at AIG the company pays out $130M in claims daily, offering big cost savings if AI could improve efficiency and fraud detection. Start-up Shift Technology uses machine learning to detect patterns of fraudulent claims and notify insurers of suspicious claims. Thus far, suspicious claims have been fraudulent nearly 75% of the time. The company has analyzed over 63 million claims to date, and its algorithm and detection software will only improve as time progresses and more claims are run through the machine learning.
Insurers are moving towards a digital world
Over 50% of the top 20 insurers in the US use machine learning technology offered by Captricity, an AI start-up, as insurers attempt to reduce their reliance on paper and legacy processes. Insurers are beginning to automate processing new business and service forms, cutting the amount of manual data entry required and consequently costs.
More to come!
Those are just a few of the things that are currently disrupting the insurance industry and, luckily we won’t have to wait much longer for more; the 4th part of the IDC is coming up November 9th and 10th. We will definitely be tuning in so make sure to subscribe to our blog to catch my highlights from Part 4!