- Where Insurance & Technology Meet

Driving Is Not Just Moving Anymore

While Artificial Intelligence (AI) has utility across myriad programs and products, it seems that automotive AI has the largest set of immediate applications in the works.

To be fair to other application developers, automotive technologies have built tools and applied integrated programs to assist human drivers. That said, it seems clear that AI will be ‘driving’ (pun intended) the automotive environment for the next two decades or more.

A Case Study

Edmund Zagorin is a procurement expert who focuses on adoption of emerging and cutting-edge technologies. Recently, he discussed Artificial Intelligence in Insurance – Three Trends That Matter.

Hats off to Zagorin, who shares his current knowledge of users, suppliers, developers, and third-party overseers. He quotes Warren Buffet on the future of insurers and automotive suppliers:

Buffett may have been referring to a 2015 KPMG report which predicts that “radically safer” vehicles, including driverless technology, will shrink the auto insurance industry by a whopping 60% over the next 25 years.

And Zagorin suggests that AI and three key functions will drive savings for insurance carriers, brokers and policyholders, plugging into existing transformations within the insurance industry:

  • Behavioral Policy Pricing: Ubiquitous Internet of Things (IoT) sensors will provide personalized data to pricing platforms,
  • Customer Experience & Coverage Personalization: AI will enable a seamless automated buying experience,
  • Faster, Customized Claims Settlement: Online interfaces and virtual claims adjusters will make it more efficient to settle and pay claims

Zagorin has been around enough to have a certain amount of cynicism.  He says “Insurance as a global marketplace tends to be associated with public distrust.”  He also suggests that automation innovations may not win the insurance challenge easily.

But hope springs eternal …

Zagorin puts forward “Three Current AI Apps in InsurTech” which offers a full, digital approach:

  1. Behavioral Premium Pricing: IoT Sensors Move Insurance From Proxy To Source Data

Zagorin suggests that owners of the new technologies are allowed a wide span of new data and operational usage options. With these in place, the owner / operator will set bespoke tools for managing the AI use.

Zagorin also notes that the technologies are not new, and the data are not perfect. Carriers may still offer policy discounts that enable cross selling of devices and insurance.

  1. Customer Experience & Coverage Personalization: AI Interfaces Allow Better Customer Onboarding

The role of the deliverer and the customer – if it keeps ‘Experience & Coverage’ within bounds – could be one of the best strategies in helping the new functions and applications.

That said, the developers may find conflicts with others. Standardization could help.

  1. Faster, Customized Claims Settlement: AI Settles Claims Faster While Decreasing Fraud

The external information from the internals of the vehicles and third party users, are also well thought out. The only challenge is to understand that some claims can be settled without humans. That said, however, but we all know that the opportunities require best in class, some of whom require humans.

All good, but where do we go?

First, Zagorin has deep understanding of existing and emerging automotive technologies, and predictive data for pricing, discounts, and cross-selling of “devices and insurance”.

Second, Zagorin notes that there is “still a lot of uncertainty on the back end of usage-based insurance” with specific reference to a report from the National Association of Insurance Commissioners which likewise cautioned:

“…UBI is an emerging area and thus there is still much uncertainty surrounding the selection and interpretation of driving data and how that data should be integrated into existing or new price structures to maintain profitability.”

UBI will not fix itself. However, larger developers will have the upper hand, which will define standards.

Automotive AI Solutions

There seems to be a consensus: The days of the status quo in the insurance business – as we know it – may well be numbered.

An April 2017 Accenture survey found that this opinion is widespread: “Insurance executives believe that artificial intelligence (AI) will significantly transform their industry in the next three years.”

Let’s look at two driving generations:

We are seeing cities grow with the ranks of Gen Z, who have high levels of education and ambition to match. To accommodate Gen Z, apartments are smaller, higher, and without cars in the basement. However, when AI-driven vehicles come along, we will see autonomous vehicles providing rides 24×7, Uber-style.

The next cohort – Millennials – either move to the suburbs, carrying two cars, or live in condos/apartments in the urban centres. The up-and-coming vehicles could utilize the same approach with Gen Z.

What are your thoughts?