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How technology, data and AI will completely change insurance (Includes interview)

The potential of AI for insurance is enormous, especially as many insurance processes are data-intensive and often repetitive. Many customer inquiries, claim reports or data analyses could theoretically be standardized and automated – ideal prerequisites for using intelligent machines. Smart algorithms will help identify insurance fraud faster and assess risks more accurately. This allows AI to be used to create personalized products. In combination with sensors and IoT, AI also helps to prevent fraud.

This could lead to insurance products that are more individual and fairer for the collective, Christian Wiens co-founder of Getsafe explains more about these insurance sector disruptors.

Digital Journal: What is the current state of the insurance sector?

Christian Wiens: The insurance business is a very traditional, stable sector, with contracts running for decades. However, we also see a consolidation of the market, with fewer insurance companies growing bigger. When it comes to digitization, almost all insurance companies are working intensively on digital solutions. A closer look quickly reveals that most insurers are still miles away from truly smart automated processes or using artificial intelligence (AI).

DJ: How is insurance being disrupted by digital technology?

Wiens: We believe that AI will fundamentally change four areas of insurance in particular: First, it will accelerate numerous insurance processes such as buying a policy or the settling a claim. This will make the experience around insurance much faster and responsive.

Second, AI will enable insurance fraud to be detected far quicker and risks to be assessed more accurately. As a result, insurance companies will be able to refine their customers’ risk profiles and improve their underwriting. “Good”, trustworthy customers could then benefit from lower premiums and very fast service.

Third, AI can be used to create personalized products. If the insurer can better assess the customer’s needs based on historical or behavioural data, it is in a position to offer tailor-made insurance bundles that exactly match the needs of the customer. And fourth, AI in combination with sensors and intelligent devices, helps preventing risks.

Therefore in the future, insurance companies will be in a position to rather prevent risks than manage claims, which will make them even more valuable and important from a customer’s perspective.

DJ: Which types of digital technologies are the most interesting?

Wiens: At the moment, insurance companies are increasingly automating processes, using robotic process automation, or RPA for short. However, these virtual robots are still limited to simple work processes such as billing, changes of address data or the processing of termination letters. They are therefore not in a position to flexibly react to deviations, for example if data is entered incompletely or incorrectly. We think that smart algorithms have an enormous potential. What is needed is an AI that can learn from large amounts of data to carry out tasks without pre-defined rules.

DJ: What effect is AI having on the sector?

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Wiens: As said, most insurers work with rule-based alghorithms, for example chatbots or RPA. AI in insurance is still in its infancy in many areas. What most insurers lack to enable them to fully exploit this potential is data. Almost all providers are still battling with countless data silos and are not able to bundle customer data over the entire customer lifetime.

DJ: How important is data analytics, and what are insurance firms doing with the data?

Wiens: Data is the most valuable currency for insurance companies. More than nearly any other industry, the insurance industry has an immense interest in data: The more insurers know about their customers, the more they can refine risk profiles and thus adjust products, prices and service.

DJ: What are insurance companies expecting from digital solutions?

Wiens: The declared goal of most insurance companies is to make their processes more effective and efficient. They focus on their internal processes and costs – rather than changing the product or the insurance experience for the better. Insurtechs are different. They approach insurance from a technological perspective and use technology to make life easier for their customers.

DJ: To what extent is the disruption coming from startups?

Wiens: Digitalization has reached the insurance industry later than other sectors. The pressure is coming particularly from the customers themselves: They expect a consistently digital insurance experience – starting with buying the policy, through consulting, to filing claims. Insurtechs are closing this gap. They have the tech knowledge, the lean structures, quick and agile decision making and often the necessary risk capital to implement innovative ideas quickly. This is why they challenge incumbents and have the chance to disrupt the insurance business as we know it today.

DJ: How are major insurance firms responding?

Wiens: Traditional insurance companies spend large sums of money and expertise to digitize their old infrastructure. But they still carry legacy systems with a large backlog of modernization projects. They all try to implement digital solutions, but they are much slower. This creates opportunities for young insurtechs to build competitive advantages.

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