Insurance: it’s not the most exciting topic in the world. But the industry is changing for the better, all thanks to advancing artificial intelligence and machine learning technology. The insurance industry is changing, and while the revolution hasn’t quite filtered down to consumers just yet – it will soon.
How is AI changing insurance?
AI and machine learning software mean that many aspects of insurance can now be automated, with AI software making calls in place of human underwriters. But that’s not all: all this tech means that insurers can now utilise big data, which is what can really turn the industry around.
Big data, which basically just means huge volumes of data which is only really possible to analyse using computers and AI, means that insurers no longer have to price policies and premiums using just a few simple data points. Instead, data can be gathered from a huge number of sources including social media and wearable devices.
The role of IoT
This is where IoT, or the Internet of Things, enters the picture. Internet of Things refers to the growing number of ordinary household objects and appliances now connected to the internet. Smart speakers, wearable devices, and black box telematics all help to feedback crucial information to insurers which can help in pricing policies fairly and accurately.
Let’s take the example of health insurance. Today, insurers still price health insurance premiums using a reasonably vague set of metrics: age, health history, and a few simple lifestyle factors such as whether an applicant smokes or drinks.
Thanks to business intelligence applications which utilize big data analytics and IoT, in the near future insurers, will price premiums for health insurance based on an applicant’s actual lifestyle. How fast do they drive their car, and what’s their resting heart rate?
What this means for consumers
For many people, this is good news. The current pricing system means that many low-risk customers are paying indirectly to subsidise higher-risk customers’ premiums, while a system of pricing based on data gathered from IoT devices will mean fairer pricing and policies based on an individual’s actual level of risk.
It also clears the path for even more changes to the industry, including pay-as-you-go insurance cover that customers can drop in and out of at the drop of a hat.
Watch this space: insurance is changing.