Where and how will AI have the most impact on the insurance value chain?

In this latest post, we recap key learnings from Panel Session 2 at AI Forum: How will AI change the structure and composition of the insurance value chain?

Last month, we proudly hosted our biggest event to date — the inaugural AI_Forum. Produced in collaboration with our knowledge partners, Boston Consulting Group, our ambition was to strip away the hype and discuss the real applications of AI in commercial insurance. We’ll be posting weekly to share the insights from each session.

In this post, we’ll cover Panel Session 2: How will AI change the structure and composition of the insurance value chain?

 

The panel comprised of:

  • Richard Coleman, European Director, Collinson
  • Phil Dodridge, Head of Business Intelligence and Disruption, QBE
  • Sam White, CEO, Pukka Insure
  • Matthew Grant, Executive Director, Abernite

Adopting insurtech – will changes in the value chain be incremental or fast-moving?

Picking up from the first session, the panel generally agreed that we shouldn’t expect to see an industry revolution. Instead, change will be an incremental evolution that is accelerated at pace by the startups that are partnering with incumbents.

Consumers will drive change too. They are demanding a better experience and want to engage with insurance companies in a different way than they currently do today. This will be a catalyst for a ‘revolution’ in the front-end experience and customer contact points.

We are learning a lot working with startups, including Cytora. It’s a real challenge for us when we talk to startups. They think in terms of days or weeks, and we think in terms months or quarters… but we are upping our game and becoming faster paced.

Phil Dodridge, Head of Business Intelligence and Disruption, QBE

Where will big changes occur first?

  • Insurers will become less dependant on brokers for information: As access to risk relevant data becomes increasingly democratised, the relationship between broker and insurer will fundamentally change, and their interdependence will decrease.
  • Insurance products will become more flexible, driven by consumer demand: The customer journey and product choice is currently poor. The way that people want to buy insurance is changing; they are asking for a different perspective to suit their needs, such as more flexible insurance products. By partnering with startups, insurance companies will be able to bypass their rigid systems and begin to deliver these more flexible and desired solutions.
  • Digital marketplaces will disrupt traditional distribution models: Startups are exploring interesting areas around the digital marketplace to disrupt the distribution model. Effectively, it’s the next stage on from the price comparison sites. One example is where the insured (commercial insurer) puts up their information and an AI tool match-makes them with appropriate insurers. It’s very early days but it changes the idea from a customer buying insurance to going out and selling risk – turning it on its head.  

How quickly will insurance pricing become commoditised?  

The SME sector is already aggressively being commoditised, but for the larger and more complex corporate entities, it’s harder to apply standardised analytics. The successful insurers will be the ones that have developed their own algorithmic AI tools, paired with people who can accurately interpret them to gain value in edge cases and truly understand the risk.

It’s a question of how much you rely on your own data. There are interesting leading indicators on loss, rather than focusing on loss itself. The opportunity comes from understanding the size of risks and the opportunity.

Matthew Grant, Executive Director, Abernite

What comes next in the evolution of the industry?

Market uniformity: While there is a first-mover advantage, it won’t be long before the digital tools that are driving transformation today are available and uniform across the market.

Attracting and retaining data talent: Talent will become more available to insurers. Today it’s difficult to attract and retain data scientists, but that will change over the next five years.

Phil Dodridge, Head of Business Intelligence and Disruption, QBE

What will be the differentiator? Data. Those companies who have richer, better, and larger volumes of data will have an advantage. It’s then a case of what you do with it. Insurance underwriting expertise is important for understanding developing opportunities and pointing the data and AI towards it.

As a final discussion point, the panel touched on the broader impact AI is having on the industry.

We’re a large incumbent and have lots of legacy systems, which we have to deal with. But with robotics, AI and new technology, we are able to leverage that on these legacy systems to automate and take all those manual tasks away so that our claims handlers are freed up to deliver a better service.

Phil Dodridge, Head of Business Intelligence and Disruption, QBE

People often talk about AI as taking away jobs, taking away value and destroying industry. The fact is that it can take away the mundane, and refocus the insurer on how they can really add value to the customer…. Customer experience and value becomes the opportunity for insurers to start focusing on.

Richard Coleman, European Director, Collinson

The industry has an issue to face up to. If you’ve got to reduce cost, you’ve got to reduce people. If you’re going to reduce people, you’ve got to figure out how to use artificial intelligence to replace the processes in a way that you can have confidence in.

Matthew Grant, Executive Director, Abernite

There are a lot of manual processes which take place in claims. This makes the job mind-numbingly boring and not great for the people, but it also leads people to deal with tasks rather than solving problems. One of the things that is fabulous about technology is that you can make people’s jobs more interesting and allow them to start to think about what they’re doing.

Sam White, CEO, Pukka Insure

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