AI: The Next Big Thing in Insurance Big Data (part 1 of 2)
Data is everywhere. But it’s not useful if you don’t know what it means. For the insurance industry, AI is poised to shed some light. What is AI, exactly? “‘Artificial intelligence’ is a slippery term that can mean everything from personal assistants like Siri, to the natural language processing done by Google, to systems modeled on the human brain that can teach themselves new skills by processing large amounts of data,” said Adrianne Jeffries at The Outline.
In insurance, AI refers to a newfound capacity to collect and interpret unstructured data (like images, contracts and reports) and to intelligent automation, in which insurers slowly migrate from rule-based decision-making systems to statistical learning and, eventually, machine learning, according to Francesco Corea, a complexity scientist and AI technologist.
While the first few steps toward AI “don’t sound much different from a typical computer program,” as Jeffries put it, “market researchers expect to see AI creeping into customer service and higher-level aspects of insurance.” More telling, Price Waterhouse Cooper predicted last year that AI will have a “profound” impact in identifying, assessing, and underwriting emerging risks.
The change starts with process improvements and simple efficiencies. But make no mistake. AI has the potential to flip some tables, industry-wide.
The model, before AI
Insurance has always been data-focused, and a lack of data has never been the problem. “Especially in the insurance industry, data is available in abundance,” said Babak Ahmadi, CEO of an insurtech AI firm.
“Patterns in the data, however, escape the attention of the human eye,” Ahmadi said, when they’re not obvious, when the volume of data is too much for a human mind to process, or when – as is often the case – the data is unstructured, or only semi-structured (e.g. images, reports and contracts).
As a result, even while insurers have focused on gathering more and better data, the business itself has remained largely intact. That, Corea said, is what could be about to change.
A quick tour of the future
How is AI set to disrupt insurance? It has to do with which direction insurers are looking: forward or back.
“Analytics and Business Intelligence (BI) applications use historical and current data about the business at hand and help to make the right decisions in an informed manner,” Ahmadi said. They focus on what happened, looking to the past for insight.
Meanwhile, AI techniques look forward, to the future. “Given the historical and current data, what can we uncover in the data?” Ahmadi said. “What can we predict for future developments? What can we optimize? What can be automated?”
What are some other implications of AI in the insurance industry? Tune in next week to Part Two of our “Next Big Thing” article series. In the meantime, download our latest free report, “11 Emerging Auto Insurance Trends.”