AI becomes useful in an industry where there is a lot of data available. In the insurance industry, there are no factories, warehouses, or retail stores, but there is an abundance of data. Insurance companies thrive when they properly estimate the risks involved when insuring people or assets against losses. For example, car insurance premiums are generally greatly influenced by the age of the insured driver. Consider the premium for liability coverage of $100,000 bodily injury per person per accident, $300,000 total bodily injury for each accident, and $100,000 property damage per accident. The average premium for drivers aged 16 to 19 is $2,999. [i] The same coverage for persons aged 40 to 44 is $1,603 and for persons aged 60 to 64 the premium is $1,169.[ii] One might think older people pose a greater risk, but the data does not support that view. An online insurance broker put it this way,

The elderly get in less high-speed accidents, and it’s not only because they drive 35 miles per hour on the highway. Their experience on the road gives them a huge advantage. Studies show that once you get old, you start to learn more about your limitations on the road, and therefore take fewer risks. As a result, car accidents involving the elderly tend to be much less serious in nature.[iii]

Historically, setting premiums based on age and geography has been the most reliable data available to the insurance company risk departments. With today’s technology, it is possible data could become available directly from cars, including what routes the driver takes, how fast he or she drives, how hard they brake, how often they swerve, and even how often they had to take control of the vehicle away from any semi-self-driving modes. The result could be car insurance premiums which are set up based on how safely you drive, not how old you are. Elon Musk, CEO of electric car maker Tesla, said that the company plans to enter the insurance business. He said on an April 2019 earnings call, “If a driver uses his or her vehicle in a crazy way, Tesla could raise the customer’s insurance rate”.[iv] Jared Shelly, a journalist, wrote, “Imagine life insurance on a pay-as-you-live basis, where rock climbing will increase your premium and a yoga class will decrease it.”[v]

On the claims side of the insurance business, new automotive technology could use onboard sensors to determine the damage from an accident. Onboard cameras can provide evidence of exactly what happened and what other pedestrians or vehicles were involved. A smartphone app with an AI driven assistant could step the car owner through a simple claims process.

A New York based startup called Lemonade, a property and casualty insurance company, is using AI to transform the business model of insurance. The company boasts,

By injecting technology and transparency into an industry that often lacks both, we’re creating an insurance experience that is fast, affordable, and hassle free. Unlike any other insurance company, we gain nothing by delaying or denying claims (we take a flat fee!), so we handle and pay as many claims instantly as possible. Lemonade has targeted the market of home and renter insurance for urban dwellers. Using AI, the company boasts it makes everything instant with 90 seconds to get insured and 3 minutes to get paid for a claim.[vi] Lemonade has an artificial intelligence bot named Maya which the company says, “will craft the perfect insurance for you. It couldn’t be easier, or faster.”[vii]

You can read more about AI in insurance, banking, healthcare, manufacturing, agriculture, and much more in Robot Attitude: How Robots and Artificial Intelligence Will Make Our Lives Better. If you are not on the list to get notified when Robot Attitude is published, click here. I will be sending an email to everyone on the list as soon as the book is available on Amazon.

[i] “How Age Affects Auto Insurance Rates,”  4AutoInsuranceQuote.com (2017), https://www.4autoinsurancequote.com/learning-center/how-age-affects-auto-insurance-rates/
[ii] Ibid.
[iii] Ibid.
[iv] Michael Martinez, “How Tesla Plans to Cut Customers’ Insurance Costs: Tap into Autopilot,”  Automotive News (2019), https://www.autonews.com/finance-insurance/how-tesla-plans-cut-customers-insurance-costs-tap-autopilot
[v] Jared Shelly, “What Insurance Will Look Like in 2030,”  Risk&Insurance (2019), https://riskandinsurance.com/what-insurance-will-look-like-in-2030/
[vi] “Forget Everything You Know About Insurance,”  Lemonade (2019), https://www.lemonade.com/
[vii] Ibid.