Fast Fast Forward

Artificial intelligence & insurance: The unexpected love affair?

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This article was first published in Insurance Post.

The Steven Spielberg science fiction movie “A.I. Artificial Intelligence” told the tale of an android boy programmed with an ability to love. The film, inspired by a 1969 dystopian short story “Super-Toys All Summer Long”, played on our fascination with the possibility of a world full of virtual reality and machines where it is difficult to distinguish between what is real and what is not.

While that may seem far-fetched, artificial intelligence is already a part of our society, whether we are aware of it or not. Interactive, simple examples of artificial intelligence – computer systems that are able to perform tasks that usually require human intelligence – already are being widely used across industries.

Those recommendations for TV shows made by your streaming service; the fraud detection used by your credit card supplier; the voice assistant on your smartphone. All of these are examples of artificial intelligence being used in our everyday lives. There is even a brewery that uses a machine learning application on social media to take on board consumers’ comments about its beer and make changes to its recipes.

A world where retailers send you goods before you have even ordered them seems futuristic, but that technology is under development.

XL Catlin produced a report earlier this year looking at the ways in which AI poses new risks – and also the opportunities it presents for companies in general, and insurers in particular. One aspect of AI is machine learning, which enables computers to be taught an action without having been explicitly programmed how to perform it. The machine has the ability to adjust and adapt to changes based on learned actions.

As machine learning becomes more widely adopted, liability issues could arise if an application fails. Other areas of risk and insurance that may be affected include intellectual property, cyber, employers’ liability and professional errors and omissions. The insurance industry is starting to examine these potential risks and a whole new genre of questions is being asked about the implications for our customers and the sector.

On the flipside, the potential opportunities for businesses that embed artificial intelligence are huge; they will be able to set up more efficient processes and harness big data to power predictive analytics, among other things.

 

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A world where retailers send you goods before you have even ordered them seems futuristic, but that technology is under development.

 

The development of driverless vehicles –an application of AI and machine learning– will change the operational models of a number of industries, from manufacturing and transport to energy and agriculture. To support their clients, insurers will need to understand the risks associated with vehicles that drive themselves. This is an area that we, at XL Catlin, are working with our partner, Oxbotica, to actively learn by designing and developing new risk and insurance solutions for this new world.

And artificial intelligence will influence all parts of insurance, from how the product is sold, how we price and underwrite, and to, most importantly, how we quickly pay claims. Take cyber as an example; a potentially huge risk, top of many companies’ priorities, and yet a risk for which there is not a wealth of claims history and which – therefore – poses challenges for underwriters as they attempt to design and price coverage and select risks.

Artificial intelligence, however, can introduce new data gleaned from the web, such as a history of reported and unreported data breaches and the characteristics of the companies incurring them. That data can be analysed – fast – and used to predict the probability of loss much more accurately than a human could.

Of course, these technologies will not make humans obsolete. But rather they will help underwriters and risk professionals to do their jobs more efficiently with better tools and more insights.

We are working with start-up partners to explore what is possible. Namely, we have started working with a company called Cytora which specialises in AI. We are using their expertise in sourcing and analysing data from multiple sources, including external data from websites, news articles and government and industry datasets, to create new insights into risk.

New technologies will help us develop better products for our customers, build new digital distribution channels and create a step change in our technical capabilities including the way we underwrite and price. AI will be a key ingredient to support our decision-making and enhancing these capabilities.

Technology and AI is changing how we interact with each other, but also how we engage with machines both in our work and at home. There are numerous scientific studies on the separation effect from being without your smartphone. Friends are now sharing on social media various stories on amusing responses from their voice recognition software or instances where they have had to use a stern voice when a question is not understood.

As one of Steven Spielberg’s AI’s characters asks: “It isn’t just a question of creating a robot that can love; isn’t the real conundrum, can you get a human to love them back?” It seems, in reality, that consumers are already falling in love with robots. Will the insurers be next?


Vincent Branch leads Accelerate, XL Catlin's innovation team focused on leveraging commercial opportunities arising from new technologies. He can be reached at vincent.branch@xlcatlin.com.

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