Technology
The AI Insurer

• Edward H. Vandenberg
• February 2019
• 

On a horizon that includes customer expectations of mobile real-time services and intelligent customer interactions, the trinity of blockchain, internet of things and artificial intelligence will help transform the insurer we know today.

AI-enabled insurers will have a different core consumer function, provide more agile services and will execute a business model that will be relevant to customer demand and social purpose using a dynamic, real-time ecosystem. In the language of AI, here is a forward-looking view of key future insurer functions and activities.

In some lines of business, carriers will shift to helping individual policyholders prevent and avoid accidents by using sensors, prediction models and cloud-based services. They will also detect environmental conditions and usage when an insured loss is imminent.

With losses averted, claim payments are avoided and repairs are unnecessary. For the AI insurer, the business model is a shadow of its former self, where the insurer financed and assisted with claims processing and repairs after the claim occurred. This has broad implications for the financial foundation of insurers as claim reserves will no longer be available for investment.

In order for intelligent agents to function, the devices and data they provide must have control processes applied. This is comparable to loss control field activities that occur today, extended to certifying IoT devices in the loop of AI. Supporting functions of the AI insurer include inspecting things to be insured and certifying sensors so that accurate data sets are maintained throughout the life of the contract.

Smart contracts will democratize the funding of exposure in an automated auction, not unlike reinsurance markets at Lloyd's of London, but in a virtual and global financial marketplace. The financial function will consist of facilitating the financing and clearing of insured exposure moments at the lowest possible cost.

Policyholders will be subscribers that order insurance for future moments via mobile devices and prevalent AI consumer interfaces, such as Amazon Alexa. The future of augmented intelligence will be enabled by an ensemble of technologies, such as deep learning, IoT and blockchain, supported by real-time data access and a “sensored” world of people and things. The end game includes reduced operating expenses and higher net operating margins.

Despite monitoring, alerts and advanced warning, claims and repairs will still occur. However, with monitored vehicles, equipment and smart contracts, the claims process will be dramatically improved by providing repair and replacement services at the lowest cost/highest quality by facilitating an auction and clearing process for physical claims services.

Certainly this transition will be incremental. But if the FAANG (Facebook, Apple, Amazon, Netflix, Google) companies enter the game, we'll see the world's largest legacy insurers forced into a “slow follower” position with not enough time or resources to save the enterprise.

While this is a drastic shift, it is one where we'll see fewer accidents and injuries, and technology will reduce the impact of loss on everyone. Perhaps the question today is: What is the transition path of carriers and who will lead among peers and enjoy the advantages of meeting disruption head on?