3 InsurTech Forces Driving Core System Strategies

InsurTech startups are leveraging the latest advances in machine learning, new big data sets, and IoT sensor data to drive fundamental changes to the insurance value chain and to change what insurers need from core processes and systems.

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New powerful InsurTech solutions are coming to market and they are driving insurance companies to rethink core systems strategies. Google’s “Alpha Go” artificial intelligence (AI) program provides insight into the impact and change these latest solutions are bringing.

Last year Alpha Go triumphed over the Go World Champion Lee Sodol in a 5-game match. For those imagining this as an example of computing brute force calculating all possible game moves to overtake a human—think again.  Alpha Go actually taught itself how to play the game of Go using real matches and then playing matches itself; just like a human does but much, much faster. Yes, you heard that right, the AI “taught itself” using a Go database composed of 30 million moves over 160,000 games –much more experience than a human player could ever accumulate in a lifetime.

Similarly, InsurTech startups are leveraging the latest advances in machine learning, new big data sets, and data coming in from IoT sensors to drive fundamental changes to the insurance value chain and to dramatically change what insurers need from core processes and systems. Here are three areas to watch:

AI & Big Data Analytics: A few weeks ago digital insurance pioneer Lemonade announced they had settled a renter’s insurance claim in just three seconds with no paperwork. Lemonade’s claimsbot, called “AI Jim,” uses machine learning to translate data into decision support analytics that protect the carrier from fraud while rapidly settling most claims.

InsurTech startups are now offering machine learning as a service to help carriers detect fraud or otherwise continuously mine big data sets to drive faster and better underwriting, claims, and service decisions. These new AI services can be deployed very quickly and their value validated with small experiments before scaling up.

Digital Self-Service FIRST: Some insurance customers may continue to prefer the option of speaking to an agent or a human call center rep, but their dominant demand will be to have 24/7/365 digital access to perform any purchase or service transaction on a self-service basis. This is fast becoming non-negotiable.

To create a great digital customer experience, we don’t need to eliminate the conversational interaction option. This past summer, IBM announced Watson Virtual Agent. Using Watson, customers and agents can ask questions via voice or texts in natural language and receive clarifying answers in response. Unlike a human call center rep, Watson can also read and understand the language of every product ever sold if desired.

We are fast approaching the point where chatbots with Watson’s advanced cognitive capabilities will be more accurate and provide a better option than a service agent.  Up until now, companies that lagged behind on the digital engagement front didn’t pay much of a penalty since their competitors had the same limitations. This is changing rapidly with leading insurers beginning to measure performance against best practices such as Amazon.com versus looking to other carriers. And InsurTech solutions are providing the tools to meet those performance standards.

IoT and Ongoing Customer Engagement: Life insurers are beginning to recognize that creating incentives around ongoing wellness exams and fitness tracking can deliver more long term protection than highly invasive home paramedic exams, urine tests, and blood vile testing. This is especially true for younger applicants.

The long term “customer engagement” benefits that flow from designing life and health insurance products that feature an emphasis on lifetime wellness monitoring will include both lower risks and opportunities to sell entirely new categories of products and services.

IoT sensors in home and auto insurance are empowering everything from digital neighborhood watches and smart homes that actively avoid claims, to the dramatic risk reductions that are already flowing from auto pilot and, soon, self-driving features on cars. While these developments will peel away tens of billions of dollars in losses a year they will also open up vast opportunities for entirely new product and service categories.

These three forces represent powerful levers InsurTech startups are using today to drive disruption and bring new capabilities to the insurance industry. Competing in this digitally transformed industry will require the integration and use of big data, analytics and AI that continually optimize the experience delivered to the customer.

Today, there are 300+ companies working in the InsurTech ecosystem to bring these new disruptive data, analytic, and AI enabled capabilities to market. No core system vendor or insurance company can independently out innovate this fast growing ecosystem. Insurance companies must revisit core systems strategies to make sure the choices made support and enable a plug and play approach to incorporating these powerful new components and the competitive advantages they enable.

Mike Connor and Brian G. Mulconrey // Mike Connor, is CEO of Silicon Valley Insurance Accelerator (SVIA) and Program Chair for the InsurTech Silicon Valley Summit, March 29-30. mike@sviaccelerator, (650) 731-5410. Brian G. Mulconrey is co-founder of Force Diagnostics, Inc., program director for SVIA, and an advisor to InsurTech startups. brian@sviaccelerator.com, (512) 413-8061.

Comment (1)

  1. Let me volunteer as claim hacker …to show the claim settlement by robosettler like watson looses in 3 secs…haha . underwriting is far more simplier than claims i bet.

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