Insurers need to win the game of robot wars
The Future of General Insurance 2017 was held in London at the start of November, when innovation was the key theme – and particularly the role that AI and robotics will play going forward. bodyshop magazine went along to find out more.
A rising chorus of voices is warning against the doomsday threat posed by artificial intelligence (AI). Great minds from Professor Stephen Hawking to Elon Musk all believe that, if mishandled, AI and robotics could spell the end for humanity.
For insurers, though, the potential benefits of this technology are myriad and simply too persuasive to ignore. Moreover, their customers are increasingly migrating to automation – 65% of all internet communication now involves bots in some way – meaning they simply can’t afford not to follow suit.
And not just their customers. Competitors, too, from outside industries, are muscling in on the insurance patch and if insurers don’t use the data now available to better understand their customers, and to mould their services to suit what they want rather than what insurers want to offer, then they will be replaced. A growing number of auto manufacturers now offer car insurance, John Lewis provides household cover, and how long until Amazon follows suit now it’s developed a keyless home entry solution? Once the likes of Amazon, Facebook and Google take an interest in your sector, the threat to those already in that space becomes, overnight, clear and present.
‘The people with the cleverest robots will win,’ said Stephanie Smith, chief operating officer at Allianz. ‘If the traditional insurance world doesn’t take hold of this technology it will get gobbled up.’
But what exactly does taking hold of the technology mean, and where, specifically, should insurers hope to reap the rewards? Stephanie believes the three key benefits on the table are reducing business risk by more informed underwriting, reducing cost, and speeding up processes. All three are attainable by gathering, interpreting and acting on the vast swathes of data now being generated. But, she insists, you need robotics to do that.
She said, ‘It will require initial investment, but the business case really is quite compelling. However, before you invest, you need to have a clear idea what you want from robotics.’
Meanwhile, in this world where the customer holds sway, insurers can – and must – use the technology to change their relationships with their clients. According to Adam Beckett, product and proposition director at Aviva, insurers need to reinvent themselves. No longer can they afford to be regarded only as the company that fixes things when they go wrong. Instead, they need to be service-oriented, with services tailored to prevention instead of cure.
He believes there are three end-goals insurers must remember: reactive to proactive; fix to prevent; low engagement to high utility. He urges insurers to be proactive and try to generate a relationship with their customers rather than simply waiting for their customers to contact them. He says the industry can do this by introducing a range of services which will make their customers’ lives easier, while minimising the risk of things going wrong. Doing this successfully, he continued, would increase the engagement points and move the insurer from a negative to a positive in the mind of the customer.
Adam said, ‘What does the customer want? To avoid hassle and disruption. We need to move from simply fixing things when they go wrong, to helping them run their homes and cars more effectively to prevent things going wrong in the first place. We must create regular, intimate moments with customers that are not intrusive, but useful to them and not always to do with a claim. Introducing this gives customers more reasons to engage with us regularly, and we’ve seen customers deepen their level of service with us as a result.’
Installing sensors in the home and notifying the customer before a drip becomes a leak is just one simple solution.
There could, Adam continued, be another benefit to this new relationship between insurer and customer. He admitted that the insurance industry is among the least trusted industries out there, but believes that could change if they positioned themselves in a more positive space of the customer’s life.
However, the IoT is double-edged sword and brings a range of new risk. Those monumental – and legitimate – worries of Professor Stephen Hawking and Elon Musk might be too broad for insurers to face down on their own, but they have other issues to contend with. Clare Lunn, director of fraud, LV=, warned that the Internet of Things (IoT) creates a number of new doors through which fraudsters can infiltrate a process. She points out that with three billion people in the world already connected, and 90% of the UK population, the scale of the threat should not be underestimated.
She said, ‘People say we won’t be talking about fraud in three years. That’s very optimistic. I don’t think fraudsters go away. I think they evolve, and often quicker than us.’
Clare pointed to ATMs, identity threat, account takeover, source coding, and false documentation as emerging and significant opportunities for fraudsters, with insurers particularly vulnerable at the point of quote, sale and claim.
She said, ‘The IoT is moving insurance from fixing to prevention; that’s where we need to go with fraud too. We need to look at frontline tools we’re using and ask ourselves if we’re doing enough to prevent fraudsters coming onto our books in the first place. There are tools available. Also, do we have the skills necessary in our industry? Do we have cyber specialists? If not, we need to get them, or partner with companies that do have them.’
Clare added that by astute use of the IoT, and accurate interpretation of its data, insurers would also be able to gain a clear picture of the customer and therefore be better able to spot fraudulent actions.
Going beyond daily risk, however, Kathleen Sullivan, vice president, head of insurance, IBM UK & Ireland, believes the sector is actually facing more profound threats than it realises. She agrees that trust is fundamental to the future of insurance, but fears trust could be a casualty of AI and robotics, if it comes with increasing cases of fraud. No one wants to be the company in the headlines following an incident of cybercrime, but she says it’s trust in the entire industry that is eroded by these bad news stories.
‘It’s an existential threat,’ she said. ‘It’s not a threat to an individual company, but to the industry as a whole. So insurers should be more prepared for IoT than any other industry.’
In many ways, this emergent technology – or has it emerged? – harks back to the creation of the internet, and faces the same conundrum. It can be anything, both a force for good and a force for evil, and only how we use it will decide that.