Artificial intelligence (AI) comes with new opportunities to improve underwriting, marketing, new products, claims, and distribution. However, there are known unknowns, and a history of challenges that have little relationship to the technologies. Given the volatility of new tools, evaluating and managing AI is a dynamic task.
When the world gives you lemons….
Some start-ups are already demonstrating the viability of AI tools. Last March, Digital Insurance organized a conversation between associate editor Danni Santana and Daniel Schreiber, CEO, Lemonade.
In order to achieve his goal to ‘Uberize’ insurance, Schreiber put a heavy emphasis on AI, noting that the Lemonade company is “built on artificial intelligence and behavioral economics.”
Throughout the conversation, one element was obvious: AI technologies and humans would share the responsibility to learn about the functions. However, with customer interaction, the goal automatically leans in the direction of AI.
For example, when Santana asked about ‘personal touch’ that customers might want, Schreiber replied:
We get a lot of inquiries that are answered by human beings. We have a phone number you can call and we also have chat through the app if you’re asking a question the AI hasn’t been trained on. But the short answer to your question is no. I think the target audience for us doesn’t look for a human touch.
Schreiber noted that larger P&C carriers would be able to meet those needs, but the target audience for Lemonade “doesn’t look for a human touch.”
Tough stuff. But Lemonade is not alone.
AI calls for major changes in operations
AI has the capability to impact knowledge-worker domains.
Writing in youtalk-Insurance, Ipsita Pradhan, Institute of Risk Management-Special Interest Group, cites activity with customers in the financial markets: “Hedge funds are starting to adopt algorithms too, to decide where to invest their capital, as a means of providing investors with investment opportunities with lower management fees.”
One does not have to ponder long to figure how the management fees are lowered. Pradhan writes: “This increasingly popular ‘robot-advisory’ is currently a buzz word within finance and could potentially disrupt finance as it takes away the human bias.”
Suppliers who get it, get it…
Last fall, Guidewire acquired Cyence and organization that “applies data science and risk analytics to enable P/C insurers to underwrite ’21st century risks’.”
In a release, Guidewire’s co-founder and CEO, Marcus Ryu, said:
While Guidewire has focused on core operations, data management, and digital engagement, Cyence applies expertise in data science and machine learning to the modeling needs of insurance product design, pricing and underwriting for 21st century risks.
The major targets are “cyber, reputation and new forms of business interruption risk that have gone underinsured or uninsured.” Arvind Parthasarathi, Cyence co-founder and CEO, said these exposures are existential threats for insureds.
But there is a hook
Ipsita Pradhan started her article noting that ” Artificial intelligence (AI) dates back to 1956 when it was introduced as a subdivision of computer science,”
That is true if we are taking a very narrow line of site. Wikipedia’s “History of artificial intelligence” starts out a bit further back:
The history of Artificial Intelligence (AI) began in antiquity, with myths, stories and rumors of artificial beings endowed with intelligence or consciousness by master craftsmen; as Pamela McCorduck writes, AI began with “an ancient wish to forge the gods.”
The article jumps quickly to the invention of a programmable digital computer in the 1940s and to the codification of AI in 1956.
However, the remainder of the article is a series of increasingly challenging peaks and troughs. The repeating challenge relates to money and not-quite ready functionality.
Ready to go deep?
This iteration (which began in 2000) seems to have staying power and interest from the business communities. Certainly, financial services generally – and insurance specifically – are investing heavily to get positioned with AI.
What’s your take on all this?
Editor’s Note: The 2018 Insurance-Canada Technology Conference has a half-day stream of experts’ as well as other sessions, which are relying on AI technology. Click here for information and registration.