This article is the second article
According to Ellen Carney, principal analyst at Forrester Research, the best use of AI, new technologies, and new ideas is in managing the large amounts of data in insurance industry operations.
“We may see insurtechs emerge that can work on data quality, data optimization, normalization, and synthetic data,” she says. “All these things that are used to train models are going to get a lot of attention.”
The evolution of InsurTech 2.0 will create value and reduce costs for insurance business models, said Bill Pieroni, president and CEO of ACORD, a global insurance industry standards organization. Pieroni added that the customer service functions developed by insurtech companies, especially chatbots, are now commoditized and there is no real innovation there. However, he said AI can and will transform insurtechs into other functions as well.
“AI will transform this industry in such a powerful way that it will be the most impactful thing that has ever happened,” Pieroni said. “But there are a few things. One is, as with most situations, we far overestimate the impact in the short term and underestimate the transformative impact.”
As Pieroni explained, part of the hype around AI comes from a misunderstanding of its true nature. AI is just applied mathematics and better computing power. The concept of AI has been around since at least the 1950s, he continued, and AI systems were being built in the 1980s. The difference back then was that only organizations that could spend millions of dollars on the necessary processing power could do it. Today, he can get the same processing power for less than $1,000.
Pieroni said a subset of deep learning within the machine learning part of AI has practical applications in the insurance industry. “Deep learning has neural networks that do backpropagation,” he said. “We’re learning billions of parameters and zettabytes of data. [that are now available]. ”
Insurers typically see only a 1 to 2 percentage point increase in value from implementing new technology, according to Darryl Silly, the insurance company’s chief operating officer and technology officer.
That potential means that within five to seven years, all insurance companies will be using Gen AI in some form for things like claims and underwriting, Schily said.
In addition to leveraging more data, insurance companies can also apply Gen AI to internal communications, according to Steve Anderson, CEO and co-founder of Catalyit, a technology services provider for independent agencies. “There will be smoother communication between carriers, distribution systems, agents and agent technology,” he said. “It will be about things like open access and APIs.”
Insurtechs, part of Insurtech 2.0, need to address pain points if they are to survive, Anderson said. “If agents don’t see it as a big enough problem, the solution may be fun, or it may be a new, shiny object, but it takes time and effort to actually get it and start using it.” “Maybe it’s not worth the investment,’ or you start thinking about how to maximize it,” he said.
Additionally, as Pieroni noted, insurtechs need to respond to insurers’ preference for incremental change. “The reality is that large customers are not willing to throw away 20 to 30 years of dedicated heritage to take advantage of insurtech products,” he said. “We need to bolt on to that legacy with little adjustments.”
Next: How experts think InsurTech 2.0 should be applied to claims and underwriting.
