Artificial intelligence is already transforming the insurance industry, but these four segments will start seeing change very soon.
Artificial intelligence (AI) has already made significant impacts on the insurance industry, from how policies are sold to how premium prices are set. With its impact on the insurance business, the insurtech phenomenon owes its astonishing rise in part to AI, generating significant backing of investors. Accenture reported that of the $711 million invested in insurtech deals worldwide last year, 44% of that amount backed Internet of Things (IoT) and AI enterprises.
Insurance companies currently use AI primarily for claims processing and customer service through the use of virtual assistants and chatbots. Yet cutting-edge insurers envision a future where AI overtakes many, if not all, underwriting tasks, such as sophisticated data analysis and individualized risk modeling.
While AI is still just a vision of the future for many insurance companies, these four sectors will start to see the transformation sooner than they think.
Life insurers have traditionally calculated the life expectancy (and premiums) of policyholders by collecting personal information — namely gender and age — and then comparing those numbers to actuarial tables. AI, in the form of facial recognition technology and IoT devices like Fitbits, can delve deeper into a person’s true health status.
Lapetus Solutions, Inc.’s has already introduced its facial analysis program, Chronos. Instead of a lengthy medical exam, life insurance applicants upload a digital selfie, which is then scanned for indications about the person’s fitness, such as whether they smoke, how quickly they’re aging, and their body mass index.
Insurers can also access health vitals (physical activity, blood pressure) logged by Fitbits or other wearable devices. Analyzing this information through AI enables insurers to more accurately quantify an individual’s probable lifespan.
Auto insurers continue to push policyholders toward safer driving habits in an effort to tamp down rising claim costs, and many believe the solution lies with telematic devices. When installed in a car, these palm-sized gadgets record a policyholder’s road habits. If a driver speeds or breaks too harshly, those risky behaviors will be reflected in higher premiums. Conversely, safe drivers pay lower rates.
In the not-too-distant future, insurers will contend with the prospect of insuring driverless cars, operated entirely by AI innovations like sensors that help steer the vehicle. Touted as less accident prone than human-operated vehicles, driverless cars will nevertheless require new underwriting criteria. With so many parties involved in the manufacturing of an autonomous vehicle — the car maker, various software developers — insurers must assess risk and price insurance based on the data gathered from AI on the different self-driving car models, not individual drivers.
Farmers purchase agricultural insurance to recoup losses due to unforeseen damage to their crops. These policies are costly to buy, and claim payouts can be high. But with AI, insurers may have found a way to reduce losses through data analytics.
One South African company, Aerobotics, has developed a sophisticated data collection system using drones. As a drone flies over a field, it creates a 3D map of the terrain, picking up data about plant and soil health. When analyzed this data enables farmers to better manage their crops, and insurers to accurately analyze risk from natural disasters like floods.
Health and Retirement Insurance
Similar to Fitbits and facial recognition technology, AI arms health insurers with data that pinpoints an individual’s medical risks. With that information, insurers can match rates to a person’s health status — or encourage policyholders to take measures to improve their well being.
Health data has implications for retirement planning as well. People are living longer, which means they could outlive their savings. An AI-supported analysis of a person’s health and expected lifespan gives insurers that sell retirement products like annuities a foundation on which to build a long-lasting nest egg.
AI has just begun to make its mark on the insurance industry, and some hurdles remain. Will AI completely displace underwriters, or will the technology still require oversight by an expert? Insurers also face some thorny questions regarding how much data they need to amass. Can and should insurers collect genetic information? Should an individual’s social posts be reviewed for behavioral clues? With so many parties, from insurance companies to AI enterprises, gathering the data, who ultimately owns the valuable bytes?
Those questions will eventually be answered, but until then, agents should stay plugged in to the technological changes that will dictate the future of their profession.