Wednesday, 3 May 2017

The Transformation of the Insurance Sector due to the rise of Artificial Intelligence

The need for a business to offer their customers’ personalised, efficient and reliable service has never been greater. Today, society demands instantaneous communication with one another. Technologies such as Apple’s FaceTime, Facebook’s Live Messenger and Microsoft’s Skype allow communication around the world to occur immediately. This ability has meant there has been a proliferation in the amount of data being shared and consequently, it has become expected that businesses provide the same level of communication across devices. Businesses must ensure they connect with customers on a more 1-1 basis and that the customer is at the centre of its business, regardless of time or location.

The need for insurers to focus on customer service is even greater than it is within other industries such as retail, given insurance historically lags behind other industries.

In years gone by Insurers operated in a highly regulated, controlled and predictable environment. They knew that individuals chose their insurer based on their parents previous decisions. Once chosen, individuals would stick to that insurance for years, even for life, accepting new charges and changes in operation as it used to be too difficult and complicated to change insurer, as well as challenging to gather the relevant information on what insurance policy was best for each individual. This is no longer the case.

UK consumers are starting to realise that it is easy and more cost effective to change insurance providers. A recent Switching Report by found that Britain could collectively save up to £5.5bn a year if consumers switched car and home insurance along with their energy provider. This has increased the competitiveness within the insurance sector as consumers are no longer as constrained as they once were.

In order to adapt and keep up to date with the digital transformation within society, the Insurance sector has begun to utilise Artificial Intelligence and machine learning. In 2016, Forrester, the influential market research company, named US insurer USAA, which has a reputation for intelligent adoption and utilization of state-of-the-art technology, as the best in class when it comes to offering exceptional customer experience. To be named in Forrester’s list companies must not only meet customers’ basic needs but consistently connect with the customer at a more personal level. With customers becoming more connected it is becoming harder for a company to provide a personalised service without utilising AI.

Insurers are not alone in turning to AI in order to become more customer-centric. For instance, the recent Global Trends Study (GTS) on artificial intelligence by Tata Consultancy Services found that there is a clear correlation between investment in AI and business success. Based on the views of 835 business leaders from companies around the world, the GTS study found that while the majority utilise AI for its IT capabilities, by 2020 70% believe AI’s greatest impact will be in other roles, including admin, back office and sales and marketing. By adopting AI, American Express employees have been able to improve their first call resolution rates dramatically. Employees have had to contend with requests growing by 250% in recent years; however by combining AI with the data gathered from AmEx’s various customer touch points, employees have had access to a complete customer overview and can respond to requests accurately and at a lower cost than previously possible. This has led to Forbes naming American Express as one of the #25 Worlds Most Valuable Brands.

The insurance sector has long suffered from a perception of being confusing. This has been due to the complexity and monies involved in the sector. In 2016, the insurance sector alone contributed more than £35bn to the UK’s GDP, which equates to more than a fifth of the total gross value added for the financial services industry. Naturally, this amount of money has led to insurers being cautious. They are also subject to numerous industry regulations, with the knowledge that failure to comply with these can lead to sanctions and further disciplinary proceedings. It is not surprising therefore that in the recent Global Brand Simplicity Index 2017, there was no UK insurance company found in the Top 50. However, there are signs that this will change in the future. At No. 55, Direct Line rose 37 places in 2017 and in April of this year they announced they have introduced AI to automatically provide answers to customer questions, ultimately improving the customer service they provide.

Insurance is split into various sectors, one such sector, Health Insurance, will be a huge beneficiary from the adoption of AI. With the proliferation of IoT devices and active trackers, health insurers are gaining data on all aspects of a customer’s way of life, although it can be difficult to utilise this information due to the amount of data being produced. With insurers beginning to harness AI capabilities and combining the technology with more sophisticated, quicker analytical programmes, they are now able to assess claims faster than ever before. Not only that, they can utilise this data to offer personalised, adaptable policies to consumers. Policies that can be changed with the lifestyles of the IoT user, for instance an overweight individual who decides to become more health conscious could see their premiums go down instantaneously with an active tracker sending their insurer data on their progress.

With Gartner predicting that be 2020 there will be more than 20 billion devices connected to the internet, the adoption of AI to make sense of that data is vital. It will allow employees to focus on their day-to-day tasks and increase the speed at which customers receive their desired service or product. Undoubtedly, this automation will transform the jobs available within the sector. However, with the UK Government and businesses working alongside one another, business leaders are confident there will be an upswing of new types of jobs available.

Fridtjof Detlefs,
Head of Insurance Domain,
Tata Consultancy Services

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