Tech Disruptions

The Evolution And Revolution Of Data

Take heed of AI: It is about to transform your industry (if it hasn’t already)

Nikolas Kairinos

Anyone who knows the insurance industry knows that data has always played an incredibly important role. Practically since the birth of Lloyd’s of London in 1686, busy actuaries have used whatever information was available to model risk and predict likely sources of loss. Of course, the industry has come a long way in the intervening centuries, but insurers still rely heavily on vast datasets in order to identify risks and subsequently set their premiums at the appropriate levels.

Historically, insurers have been reluctant to adopt advances in technology and data analytics, particularly when contrasted with similarly well-resourced outfits in the worlds of finance and consultancy. However, attitudes are definitely shifting and in large part, this is due to the possibilities presented by artificial intelligence (AI).

A $300 Million Disruption

Indeed, the venture capital community considers the insurance industry to be so ripe for disruption that Lemonade, a US InsurTech company, managed to raise $300 million in seed funding earlier this year.

In response to these technological advances, the insurance industry is rapidly changing and firms that don’t respond risk being left behind. Consequently, most seem to be making the long overdue adjustments, with one recent study from global professional services firm Genpact finding that 87% of top insurers are already spending at least $5 million on AI each year.
As someone who uses AI to develop innovative solutions to problems faced by businesses in many sectors, I’m excited to see the insurance industry finally wake up to AI’s disruptive potential. But what exactly does AI have to offer insurers and what do industry leaders need to consider so that AI is a net benefit for everyone concerned?

The applications of AI in Insurance

For most firms, the benefits of AI come through robotic process automation (RPA); in other words, automating existing processes in order to save time and resources. For example, AI toolsets exist which could remove the need for firms to manually classify documents, write contracts or process claims. However, the value of AI to insurers only becomes clear when one looks beyond administrative tasks to industry-specific functions like underwriting.

Of course, firms will use AI for different reasons and to different extents in accordance with the services they offer and their position in the industry. What isn’t in doubt is that firms across the board will soon begin using AI to streamline their business practices and better leverage the vast amounts of user and market data available to them.

For instance, insurers are already using AI to underwrite with greater precision, predict when political or economic shocks will affect different markets and detect threats of fraud prior to them having a significant impact. The fundamental change comes in the fact that instead of relying on post-hoc data aggregation, firms can use AI to monitor real-time data and seamlessly incorporate it into their pricing algorithms.

One company in the InsurTech space that’s already driving progress on this front is Omni:us. The company develops products which extracts data from documents like crime reports and health invoices and feeds it back to insurance firms so they can underwrite more accurately. Going further, AI will even enable firms to use an individual’s health data to tailor their policy to their unique behaviours and characteristics. As the technology advances, insurance companies will gradually shift away from a reliance on ‘risk pools’ and begin to adjust prices in real time based on a constantly updated array of consumer information.

After a long period of stasis, AI is finally beginning to disrupt the insurance industry for the better. However, we are merely at the beginning of a data and technology revolution...

Fundamentally, AI has the potential to turn underwriting from a reactive process to a predictive one. That means harnessing more accurate information in order to reliably spot patterns and ultimately, set premiums at the best price for both you and the policyholder.

Away from underwriting, other companies are busydeveloping products capable of preventing insurance fraud by using AI to detect tiny inconsistencies in external and internal data. These tools have the benefit over the fraud detection systems which currently prevail because they are less likely to produce false positives, something that both irritates law-abiding customers and creates opportunities for scammers. In what’s good news for consumers as well as insurance companies, analysts predict that better fraud prevention could drive down premium prices.

Managing the Transition

However, if AI is to have a positive impact on the insurance industry, it’s not a simple question of waiting for advances in technology to reap the inevitable rewards. Industry leaders need to adopt a more open-minded attitude, one that actively seeks out new ways in which AI might be able to improve the industry. At present, many insiders are apprehensive about the pace and scale of technological change and while some of their concerns are legitimate (particularly around data retention and security) it’s important that firms work constructively with AI developers to ensure firms continue to meet the needs of their policyholders.

I’ve been developing software for professional services companies for years and I believe that successfully integrating AI into your company boils down to three things. These are understanding the limitations of both the technology and your organization, working with developers as much as budget and time constraints allow and being critical about where and why you’re integrating AI into your company’s operations.Consequently, it’s exciting to see progressive insurers beginning to work with AI startups in order to start developing bespoke technological solutions. Ultimately, AI tools are designed to improve, not replace insurance professionals by allowing them to access additional information and utilize new tools. For instance, while there are products such as Lemonade which utilize AI to forecast risk and eliminate paperwork from the insurance process. However, humans will still be required to manage customer relations and make tough judgement calls in marginal situations. Having the right people in place is therefore an important part of ensuring that AI tools offer maximum value.

At Fountech, we think it’s important for firms to understand what AI has to offer the insurance industry, and so we recently released a new whitepaper which explores how insurers might integrate AI into their business. Ultimately, with a proper understanding of AI’s strengths and limitations, industry leaders can begin adapting their firms to the rigours of the new data-driven landscape.

AI is transforming the insurance industry

After a long period of stasis, AI is finally beginning to disrupt the insurance industry for the better. However, we are merely at the beginning of a data and technology revolution that will require firms to update their practices to ensure they are keeping up with their competitors.

Ultimately, the insurance industry is fast moving towards a point where every firm employs AI in some part of their underwriting and risk management procedures. The choice is simple, you can either move with the times or get left behind. ◊

Mr. Kairinos is the CEO and Founder of – a company specialising in the development and delivery of intelligent AI solutions for businesses and organisations. Nikolas also has over 20 years’ experience supporting software startups around the world as an entrepreneur, investor and advisor, and has also co-founded numerous AI companies.

Click here to download a copy of Fountech’s new whitepaper – Artificial Intelligence in the Insurance Domain.