A Google search on AI yields about 2.1 billion results. It is difficult to scan the news of any industry without tripping across articles on AI and machine learning. Philosophers wonder about how AI will change the nature of human existence. Economists worry about job loss and propose schemes like a universal basic income to compensate. Business executives contemplate how to improve their operations and improve the customer experience. Others wonder about how human beings will change with the possibility of technology-based human enhancements, the prospect of cyborgs, and the potential to extend lifespans. These topics have been explored since the concepts of AI first began to emerge. But today there is more urgency and purpose to these discussions due to the rapid advances being made across a wide variety of AI-related fields. Much of the progress is due to the convergence of machine learning and the massive computing power now available. These are important questions for humanity, but it also turns out that there are significant implications for the insurance industry, even in the short to mid-term.
A new SMA research report, AI/Machine Learning in Insurance, investigates how AI applies to insurance, what insurers are doing to leverage AI today, and what activities and investments are expected from the industry over the next 3 years. There is, indeed, a wide variety of opportunities for insurers to leverage AI across every part of the value chain and for every line of business. Insurers are moving forward with strategies, projects, and investments, although perhaps not at the rate that is warranted by the potential benefits. Slightly more than a third of P&C and a third of L&A companies plan investments in AI related projects over the next three years. Insurers across all lines cite underwriting as the business area with the most opportunity, while claims is also an area with great opportunities and many use cases.
An important development is the new wave of InsurTech startups that are based on or leverage AI technologies to create new capabilities for insurers. In addition, MatureTech players and services firms are all rushing in to participate in the AI advancements. AI is not going to change the insurance industry overnight, but it will have a steadily increasing impact on the industry in several ways. There will be more and more opportunities to improve operations by automating tasks and decisioning. AI will also play a central role in enabling connected devices to support risk mitigation schemes. AI is also expected to be part of the transformation in every industry that insurance serves. Finally, and vitally important, is that AI will reshape the customer experience, whether via chatbots that enable more self-service or recommendation engines that enhance the capabilities of insurance professionals as they interact with customers.