There is the much talk of tech hype cycles, where a concept is triggered before experiencing an overly inflated expectation. This is followed by a trough of disillusionment and a slope of enlightenment, before finally reaching a plateau of productivity. In the insurance industry, this is particularly relevant to artificial intelligence (AI). We know that AI is a very broad concept, but in the context of the insurance industry it refers to the following techniques:
Machine learning: where high levels of automation at speed use considerable amounts of data, such as pricing engines
Deep learning: advanced machine learning where the computer imitates the human brain, such as speech recognition
Computer vision: software that enables a computer to look at a damaged car and work out which parts need replacing and at what cost
Natural language processing: where a chat bot is able manage low level customer advisor interactions
So, bearing the above in mind, where are we on the hype cycle in 2021? Had the pandemic not disrupted so much of our everyday lives, evidence would suggest that we are heading out of disillusionment phase and into the productivity phase. For some this was accelerated in the pandemic as new ways had to be found to cut costs, reduce risk and fraud, whilst maintaining revenue. Others had to conserve cash for survival and cut investment in AI-powered programmes. Start-ups generally fell into two camps of untouchable rising stars and falling stars in a crowded market place of ‘everything is AI powered these days’.
There is also a less-publicised rising star, overshadowed by all things AI, and that is robotic process automation (RPA). It is perhaps behind AI in the hype cycle and is seen as neither as sexy nor as exciting as AI. However, had more companies advanced earlier with RPA – in the midst of call centre closures and remote working – we the customers wouldn’t have been subject to extensive waiting periods to simply change a driver on our car insurance or negotiate this year’s renewal price.
And before you get lost in images of robots assembling cars or loading lorries at distribution centres, RPA is about computer processes that mimic robots (you and I) in how we deal with administrative tasks such as paperwork involved in filing for a large claim pay-out, for example. RPA completes these tasks far more efficiently than humans, as it gets through more documentation in less time, with far fewer errors, and at reduced cost. This ultimately leads to happier customers.
It is clear that technological advancement is having a positive impact on the insurance industry, however making an outright prediction on trends for 2021 is still too difficult. Data analysts generally require a minimum of two or three years’ worth of reliable data to make a prediction. But in the current environment, we need the pandemic period to wash out before we can accurately make allowances for any analytical projects.
Data is promoting healthy competition and levelling the playing field
Having recently returned to the insurance industry a few months ago, the one thing that really surprised me was just how much the use of external data had grown, such that even a relatively small and niche broker such as Tempcover could access so many external data sources to verify a customer, check car details, verify email addresses and driving licences, and so the list goes on. This essentially results in the entire customer journey – from enquiry to full cover – being reduced to just 90 seconds.
This means that the main industry players are no longer exclusively the big corporates that had managed growth through multi-billion-pound mergers and acquisitions. Instead, the most efficient and successful players are well-funded start-ups that base their product on data, technology and agility to disrupt the market. And thank goodness they did, as it provides a bit of healthy competition. I’ve worked in large organisations with a dominant market position, but that makes competitors unpredictable and behave more like a wounded animal. I’d opt for healthy competition every time!