Amid the vast changes brought upon the insurance industry by artificial intelligence (AI), an industry report has outlined three key ingredients needed for insurers to take advantage of the opportunities it presents.
According to Aon’s Global Insurance Market Opportunities report titled “Demystifying Artificial Intelligence”, insurers are already good with AI and its precursor technologies. However, to harness the full potential of its effects, carriers must work on three crucial components: data, infrastructure, and talent.
Data
According to the report, AI can be considered the key that unlocks the door of big data. This is due to the fact that many AI-based modelling techniques are data-hungry classification algorithms.
Data comes in several forms, the report adds. First is third-party data sourced from outside the insurance industry, such as aerial imagery being used in estimating post-catastrophe claims potential. The large amount of data generated by users interacting with digital platforms such as social media and search engines also holds incredible value. The insurance industry naturally possesses huge amounts of data through its business processes such as claims, applications, and marketing.
Infrastructure
Accessing the data to feed the AI requires a working infrastructure, the report said. Without the proper infrastructure, an organization cannot properly ingest huge amounts of data. While cloud computing is not necessarily a prerequisite to successful use of AI, access to vast, scalable infrastructure is enabling. Robust security is also important, due to the sensitive nature of data insurers hold. Furthermore, using outdated legacy systems will prevent carriers from using their proprietary data in innovative ways.
Talent
While most actuaries are already familiar with many modelling techniques used by AI, it does not mean that they have the capability to create such models in-house. According to the report, investments in recruiting, training, and retaining the right talent will provide two clear benefits. First is being better-equipped to do the risk-cost-benefit analysis of which data and methods to explore, and second is having the ability to test and, ultimately, implement.
Aon believes that insurers should partner with technology innovators, instead of being disrupted by them. If an insurer does not have the talent to harness AI, it can partner with a firm that has that capability.
According to the study’s author Paul Eaton, managing director in the analytics division of Aon Reinsurance Solutions, the insurers most successful in harnessing AI are those that have a pragmatic approach in evaluating tangible AI solutions that benefit existing parts of their value chain.
“The core of insurance is this: hire the right people, give them the infrastructure they need to evaluate risk better than the competition, and curate the necessary data to feed the classification models they build,” he said. “AI hasn’t, and won’t, change that.”
