The Algorithmic Insurer

How AI and Machine Learning is Transforming the Insurance Industry

Insurance Has to Change

“Wouldn’t it be great if rather than sending a team of people to clear up after a flood, we were able to tell somebody they are beginning to have a leak? That technology already exists.”

David Williams, AXA

Insurers are now able to collect vast quantities of data about every aspect of their business environment and profile their customers in detail. This massive resource of information will transform how the insurance industry operates and change its fundamental principles from protecting against risk, to becoming proactive, personalized and preventative.

In this new world, machine learning and AI will mean a profound change in what it means to be an insurer.

The Algorithmic Insurer

Moving the insurance industry from a service that consumers grudgingly buy, to one of a close partnership that forecasts and reduces risk, is what the algorithmic insurer can deliver. Reducing the fear of unforeseen events is at the core of what algorithmic insurance can provide. As an industry, technology now enables unprecedented insights into risk and how it can be mitigated.

“Nobody wants to use their insurance policy because it means something has gone wrong. If something goes wrong on your car, a leak at home or even your health, if we can raise an alert and mitigate or even prevent the damage, then that will be something our customers really want.”

-Clare Lunn, general insurance fraud director at LV=

Using algorithms is not a new technology.

The mathematical formulas insurers have been using for centuries are examples of applied algorithms. The difference today is the vast quantities of data that algorithms can now use to give insurers insights into what has been in the past opaque data siloes.

The arrival of social media, e-commerce, the Internet of Things (IoT), and online search have created a pool of information that enables insurers to profile not only their customers, but their potential risks based on factors from lifestyle to environment. Apply this information to advanced AI and machine learning systems, and insurance moves into the fourth industrial revolution, where data and its ability to profile and predict become powerful tools.

Insurers have traditionally used a “black box” approach with their IT. These systems were designed for static data and cannot handle today’s real-time data streams. In the next few years, as technologies like IoT become commonplace, dynamic data streams will increasingly become the norm. All this change will come at a fraction of the cost of black box solutions.

What Gartner calls the :algorithmic economy: will be at the center of a revolution taking place across the insurance environment. Uncoupling analytics from its data sources frees algorithms to use data that had in the past been sealed in siloes.

Today, insurers can make close personal connections with customers that were missing in the past. They can now make accurate predictions that inform their products and become trusted partners who can see how using their customers personal data can help them reduce risk.

AA Ireland Case Study

AA Ireland Chief Analytics Officer Colm Carey and Senior Quantitative Analyst
Nina Jensen talk on the advantages of putting analytics in the hands of every business user.

Advanced
Decision-making

The question insurers are asking themselves:

What can AI and machine learning really do?” and “Are these systems worth the investment?

For the entire insurance community, moving to an algorithmic-driven business offers a number of key advantages.

Dynamic Pricing

A dynamic pricing model reacts when a customer’s personal circumstances and environment changes.

Predictive Claims

Claims frequency is understood, and predictive analytical techniques are used to minimize the impact of unexpected claims.

Real-time Fraud

Potential fraud is spotted and stopped before it impacts the business.

Customer Experience

The appropriate response based on recent interactions across all channels of communication is delivered.

Operational Effectiveness

Using more automation means your business can focus on refining its algorithms to deliver even more benefit to your customers.

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The information that all insurers now have is the basis for unparalleled insights.

Where once the basis for much of the decision-making and pricing was historical trends, an algorithmic approach using AI and machine learning enables insurers to be dynamic in their approaches to developing new products that are highly targeted at specific groups of consumers.

Marketers in other industries have been riding the wave of social media interactions, but this is just the tip of a data iceberg that can now be used to inform strategic decision-making across the insurance industry. What is clear is that all insurers will need to radically alter how they fundamentally approach their businesses. This isn’t something that needs to take place in a few years, these changes are a commercial imperative today.

The Connected Intelligence Cloud

In the report “Why artificial intelligence is the future of growth,”Accenture succinctly states:

“Accenture analyzed 12 developed economies and found that AI has the potential to double their annual economic growth rates by 2035. To avoid missing out on this opportunity, policy makers and business leaders must prepare for, and work toward, a future with artificial intelligence. They must do so not with the idea that AI is simply another productivity enhancer. Rather, they must see AI as the tool that can transform our thinking about how growth is created.”

TIBCO has been working to bring the algorithmic economy to reality with a number of technologies that have resulted in what we call the TIBCOⓇ Connected Intelligence Cloud. Your business has data, but can you make sense of this resource to meet the demands of today’s consumers and develop your business to become a leader in the algorithmic economy?

The Connected Intelligence Cloud includes our systems of Insight that turn the data you now have about each customer and their risk environment into practical actions your business can take today.

TIBCO Connected Intelligence Cloud for Insurance

Digitizing your business is also a fundamental component of what it means to be an algorithmic insurer. Data analytics and business processes have converged. TIBCO can support your transition to using digital tools that open new opportunities to develop services that your customers now demand. And we understand that your business needs to use these new tools to future-proof your business and ensure it is integrated, comprehensive, flexible, and able to deliver insights

The Connected Intelligence Cloud and the systems of insight are not simply analytical engines. Data is used to not only profile your customers in depth, but also as the foundation on which you build accurate predictive models that move your insurance products from point of sale, underwriting, claims, and fraud detection to a service that consumers partner with to identify their specific risks.

Insurance then becomes an integrated component of their lives and not simply a product that protects them from unforeseen events – the Connected Intelligence Cloud with systems of insight that leverages machine learning and AI, could even help them avoid or reduce their risks.

A New Insurance Landscape

The future of the insurance industry is driven by data. The algorithmic insurer uses advanced AI and machine learning to not only refine their products and services, but to transform what it means to be an insurer. TIBCO’s Systems of Insight, which is a component of our Connected Intelligence Cloud, is an integrated tool that offers next generation data analysis.

Consumers understand that their personal data is a commercial commodity. Insurers can now use data analysis to make close personal connections with their customers, offering not just policies, but a partnership that identifies and manages risk on a personal level.

New Generation of Capabilities Propels Insurance into the Future

Insurance as we know it is transforming dramatically, thanks to capabilities brought about by new technologies such as machine learning and artificial intelligence (AI).

Welcome to the new breed of insurers that are more personalized, more predictive, and more real-time than ever.