The insurance industry has long used data & analytics as part of their business models, going back centuries. However, Machine Learning or Artificial Intelligence (AI) represents a transformative sea change, with the power to redefine insurance.
By Emma Sheard from Insurance Nexus
Monika Schulze, Global Head of Marketing at Zurich Insurance sees the opportunity for machine learning to revolutionise the insurance industry, stating that “The old way of working can be modernised and be made more efficient, but it’s also possible to find new products and services. How do we get from paying out when something happens to helping customers predict when and how something might happen?”
As an industry already undergoing dramatic disruption as the world itself changes, including autonomous cars, the Internet of Things, wearables, sensors and the quantified self, insurance companies must innovate in product development and service provision to meet the ever-changing needs of consumers.
George Argesanu, Global Head of Advanced Analytics, Personal Insurance, AIG adds that “The one thing I am the most excited about is the dynamic aspect. With telematics, Machine Learning will enable us to “see” and hopefully prevent an accident before it happens, by recognizing the patterns in the driving behaviour, traffic and road conditions. It is like Minority Report but with the precogs replaced by Machine Learning and AI and much sooner than 2054.”
Whilst machine learning is a natural partner for the growing capability born out of these new technologies, it also has the power to transform the traditional operations of insurance.
Argesanu illustrates the scope of the opportunity: “I think there is tremendous potential for our industry to use Machine Learning to do things faster and smarter. There’s not going to be a big bang followed by a new order of the universe, but slowly and surely, we are getting to a more accurate pricing of risk.”
“For the insurance business as a whole, one of the focal points is fraud mitigation. That’s where I see insurance applying Machine Learning to improve the P&L. Then claims management which is also very important. It is a much faster process and it is easier to reduce errors by using Machine Learning to process large amounts of data,” suggests Schulze.
Whilst there are many exciting opportunities, insurance companies must be pragmatic when developing a plan for implementation, balancing a variety of considerations and targeting the areas that machine learning represents the biggest value.
In the lead up to the Insurance Analytics EU Summit, Insurance Nexus recently spoke with both George Argesanu and Monika Schulze, and in addition to the above we discussed how machine learning is currently being adopted, the logical next steps for insurance and hurdles that must be overcome for successful implementation.