In an earlier post, we explored the potential impacts of artificial intelligence in big data for the insurance industry. We discussed that unlike analytics and business intelligence systems, AI isn't just looking back, drawing conclusions from what's already happened. It's also looking forward – predicting, optimizing and automating what's yet to come.
AI has other implications for insurance as well. Here are four areas where we might expect AI to cause industry disruption within the next several years.
1. The buying decision
We’ve all heard it said that insurance is sold, not bought. Brokers and agents have always been essential to bringing new customers through the door – but AI may upset that assumption. For example, thanks to AI, the macroinsurance startup Sherpa "promises to provide customers coverage ... on a direct business model (no agents or commissions)," said Mark Breading, a partner at Strategy Meets Action.
2. The insurability decision
Uninsurability is the industry's no-man's land. When a person's risk profile is too extreme, an insurer can't provide them coverage without either sacrificing their own profitability or setting the premium at a price that's not realistic for the buyer. It's a catch-22, in which one side or the other must pay more than they can afford: the insurer or the insured.
AI could upset that balance in a couple ways. On one hand, a more granular approach to risk assessment could expose more people as uninsurable, raising the need for governmental or regulatory involvement to meet the needs of vulnerable citizens by subsidizing necessary insurances, such as health coverage.
On the other hand, however, it could do the opposite: AI could bump more people out of the uninsurable category by fine-tuning the definition of what "an insurable risk" actually is. With better and more detailed customer profiling, for example, AI could reduce the need for insurers to establish a large base of exposures to establish mutuality. And a greater ability to forecast potential loss and compute its magnitude could change how chance of loss is calculated.
In short, if AI lowers the threshold of uninsurable risk, there's a chance it could make more people insurable, not fewer.
3. The safety decision
As AI data is shared with customers, they become more aware of their risks and habits. And when structured effectively, this information could affect the behaviors themselves – changing behavior simply by shining a light on it – which could make certain exposures more and more rare.
We've noted this phenomenon before in regard to driver coaching in telematics. For example, fleet owners can implement UBI driver coaching and scoring to address individual weaknesses and help their drivers improve – making the entire fleet stronger, safer and less likely to incur claims.
4. The loyalty decision
In decades past, the only real carrot that insurers could use to boost customer retention was the loyalty discount. With AI, they'll be able to refine customer segmentation and make personalized offers, adding new options to their repertoire of reasons to stick around.
Buckle up: there's more to come
Complexity scientist and AI technologist Francesco Corea named a slew of insurtech startups that are busy pioneering the use of AI in insurance. It’s clear that AI is already starting to make its mark on the industry. Is your policy administration system ready to manage industry disruption? If not, take a look at the adaptable, affordable solutions at Silvervine Software. Request a demo to learn more.
The FedNat Insured Web is a great tool for our insureds!
They like having a centralized location to view policy info, make payments, upload policy documents, and elect to become paperless to receive a discount.
The insureds also can file a First Notice of Loss for a claim and access exiting claim info. Silvervine recently enhanced the site which allows insureds to upload policy documents directly to their policy. The uploaded docs go directly into our workflows and save a lot of manual effort on our part.
From my visits with agents, the agents appreciate the app for the amount of time saved on having to download and attach photos directly to the policy.
The app can also reduce the amount of staff required for a busy office to fulfill underwriting requests for photos.
When training agents they are amazed at how quickly the photos attach directly to the policy. After taking photos using the app and before they make it back to their desk, the photo is already attached to the policy. They also like the ability to attach additional photos for pre-existing damage.
Customer Service is seeing an improvement with retention as the text message definitely triggers phone calls from insureds to make payments.
The insureds love the fact that we notify them on their phones because they state that sometimes they don’t receive their mail for various reasons.
The insureds are paying more attention to the texts then to their actual mail. We try to set all of our customers up on that option if we notice that they are not currently enrolled, as it builds great customer relations as well as retention.
As a company we have adopted the use of Policy Scan for all our policies, and our agents have adopted the use of the app as well.
Not only is it easy to use, there is also no more worrying about losing photos, having to store photos or photos being attached to the wrong policy.
With Policy Scan we have increased efficiency in our workflow and reduced our exposure on the risk.
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What started out writing one product, one line in one state has now grown into mulitple products, multiple lines and writing in multiple states. We have over $95 million in annualized premium in-force and we expect to grow by 20% during the next year all serviced by Silvervine.
Silvervine was our insurance software system of choice when we started the company in 2006. Silvervine enabled us to begin business within a few months of licensing the company. Today, we are one of the top 20 homeowner’s writers in Texas and SIlvervine’s solutions have been an integral part of our success.