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How Will AI Impact Property and Casualty Insurance?

by Precise Leads

September 6, 2017

Artificial intelligence already powers many insurers’ chatbots for customer and claim service.

A recent survey from Accenture revealed what many in the property and casualty insurance sector already know: Artificial intelligence (AI) is a game-changing technology that might revamp the entire industry. It also presents some problems, however, that companies have yet to resolve, mostly concerning liability judgment. Still, the future looks bright, and more and more insurers are depending on it.

Insurance executives are well-aware of the industry’s increasing reliance on AI. When polled by Accenture for its “Technology Vision for Insurance 2017” study, 75% said AI will either significantly alter or completely transform the overall insurance industry over the next three years.

Meanwhile, some insurers have already incorporated AI into their operations, especially in streamlining routine tasks. Others have begun to tap into its data-crunching power to more accurately assess risk.

Customer & Claims Service

By now, many insurers are using virtual assistants or chatbots to assist customers when making basic inquiries or filing claims. Accenture learned that 68% of insurers currently use virtual assistants to satisfy growing consumer demand for a digital customer experience. Several major companies already employ chatbots, including Allianz, GEICO, and the Canadian insurer RBC.

Beyond answering questions, AI also helps settle claims. Insurtech startup Lemonade, for example, sifts through home and neighborhood data to quickly process payouts. “We only use our claim algorithms to help us reach one single decision: should a claim be handled automatically or not?” CEO and co-founder Daniel Schreiber told The Guardian. “The algorithms will either pay claims instantly or call in the human to take charge.”

Similarly, Tractable applies AI after a car accident to assess the internal and external damage when estimating repair costs. The machine-learning algorithms of Shift Technology likewise sort through claims data to root out possible fraudulent claims.

These chatbots may soon morph into what Francesco Corea, AI technologist and editor at Cyber Tales, calls in an Insurance Thought Leadership article “robo insurers” able to make individual insurance coverage recommendations. He points to Risk Genius and PolicyGenius as two examples. “Robo-insurers will be a quite wide class of agents who will end up providing different services, all of them with the final goal of helping the clients to undertake risk-mitigating actions and only cover the real (residual) risks,” Corea writes.

Risk Assessment and Liability

By collecting gigabytes of data, AI offers insurers a predictive analysis tool, says Parker Beauchamp, the CEO of risk management firm Inguard. These predictive models can be used for expense management, high value losses, reserving, settlement, litigation, and weeding out fraudulent claims, he explains. “The algorithms compare answers and information provided by customers to make appropriate recommendations for each risk scenario.”

Deploying AI for risk assessment, however, carries some risk — at least in the short term. Take the rapid advancement of self-driving vehicles. When human-driven cars collide, liability either rests with the driver or a mechanical failure in the vehicle. But autonomous cars operate with complex and interconnected technology, making it much more difficult to assess liability. Was the accident due to a glitch in the software, leaving the software’s manufacturer at fault? If the car’s systems were hacked, would a cyber insurance policy cover the loss? Who would be responsible for property damage

Those questions will only be answered when the industry gathers more claims history from AI-powered vehicles and other devices. “As we understand how the confluence of technologies and the modern work environment play out through claims, we learn how those losses are settled and the contribution of each technology — as well as the combination of technologies — to the root cause of loss,” Gail McGiffin, Principal in Ernst & Young’s Insurance Practice, told Risk & Insurance. “You can’t substitute the years of claim history that still have to happen.”

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