Artificial intelligence (AI) has been a popular topic of year-end prediction articles in recent years. Looking ahead to 2023, I offer a viewpoint that goes beyond the marketing buzz with my forecasts of the value that insurers could realize from AI in the year ahead and the potential impacts these AI implementations will have on their customers.
Insurers will start to trust AI.
This time last year, I made the case for insurers to begin taking their insurance data more seriously. For the insurers that did this, it is time to address the next challenge—the ability to trust AI. While customers have been in awe at the promise of AI, if it does not provide accurate, unbiased and micro-personalized innovations with impeccable levels of data transparency and security, AI is not ready for prime time.
After effectively consolidating large streams of data securely and accurately, I expect insurers will feel more confident in the integrity of their models—models thatwill serve as the basis for the intelligent products and services they will offer their insureds.
Using AI in our industry comes with higher stakes, as it is about life and not how to get the best recommendations for a restaurant, book or vacation spot. These core areas will be addressed, and I believe confidence in the value of AI will start to take off with carriers and the insured.
Consumers will start shopping for insurers with the best AI.
In the last few years, the majority of insurers have not figured out in a concrete way what insurance AI products and services to offer. There are trailblazers in the industry that I believe will start leading the way beyond telematics to really personalize the value insurance can deliver to customers. This most likely will begin with auto insurance, as most work done in our industry by InsurTechs and large insurers with machine learning (ML) has been around understanding data to prevent risks.
Next year, I think insurers will turn the corner and start offering daily, if not more frequent, recommendations for drivers on how to be safer and improve their insurance rates, just like GPS offers drivers better routes during traffic jams. With continued economic pressure and instability, saving money on car accidents, fuel and insurance rates will likely be more important in 2023.
AI will help insurers move past the top buzzword of the last decade “digital transformation” to real-world insurance value.
While buzzwords make for good headlines and marketing, the insured does not care about a carrier’s digital transformation initiatives if it does not impact their pocketbooks or quality of life. As we are witnessing across many industries, reducing expenditures is a major priority, which is resulting in slashing budgets, hiring freezes and layoffs. These pressures will make insurers wake up and look for technology partners and internal employee talent that can translate AI into meaningful value for the insured.
Relying on buzzwords to attract clients or generate news stories worked in yesterday’s world, but it will not cut it for too much longer with today’s customers.
Insurers and the insured will be stronger partners in preparing for and responding to natural disasters.
The work done by innovative companies around parametric insurance (insurance covering the probability of a predefined event) is encouraging. While I think the majority of the work has been on the technology side, the insured can play a more central role in minimizing risk, saving lives and reducing the loss of assets during natural disasters.
The most immediate area is by leveraging more sensors and applications that can track a person’s activities along with their cars, homes and other assets in real time to make the parametric insurance rates and coverage personalized to the individual and not on a macro level. If the insured and carriers can do this, this would be a HUGE achievement. Instead of individuals scrambling to prepare for the disaster, they could be better prepared with intelligent recommendations about their lives and assets to reduce the likelihood of accidents or claims as much as possible since the exact impact of a disaster is never certain.
AI from other industries will begin integrating with insurance AI/ML to provide end-to-end customer experiences.
As consumers purchase more sensor-based technologies and open up permissions to monitor more data, this will create opportunities for new technology partnerships between P/C insurers and vendors in healthcare, tourism, entertainment and other areas to ensure positive and safe customer experiences.
As an example, an individual with diabetes can have data from implantable glucose monitors synced with their auto insurer’s telematics system, which can trigger an alert to the fact their blood glucose levels are concerning. As part of the alert process, the auto insurer could recommend the individual should perform the following safe driving tactics to either pull over to take the required medicine or find a store with the food they need to protect their health.
There are likely many other areas where insurance and AI can deliver value, but I think we as an industry must master the foundational things like trust, security, transparency and accuracy first. From there we can build on real-world, valuable offerings inside and outside the insurance industry to transform lives.