How Insurance Companies Can Seize the Potential of AI

How will artificial intelligence shape the insurance industry? That was the topic last month as I sat down with journalist Lindley Gooden for a quick interview on Insurance Innovators TV. Here are my thoughts on how the insurance industry’s use of AI in decision-making. You can also watch my interview here.

The steps towards AI implementation | Insurance Innovators (insurance-innovators.com)

As I noted in my forward for the Insurance Innovators Trend Report, “For an industry looking to futureproof its role, its relevance and its revenues in a turbulent world, AI is a potent tool. Presenting an unprecedented opportunity to not only understand and price risk better than ever before, AI will transform the customer relationship, enabling insurers to get closer to customers in ways that add real value to their finances, their health, and their daily lives. Hyper-personalised, dynamic and adaptive, the next generation of insurance will see customers navigate a complex and changing world with confidence, knowing that a powerhouse of data analytics, risk insight and financial resilience has their back 24/7.”   

Now, let’s be honest: while Generative AI has elevated discussions of artificial intelligence in every industry, not just the insurance industry, we’re still a long way away from fully leveraging its power, or even clearly understanding the full potential. But looking beyond Generative AI, I’m excited to see the ways that advanced analytics and AI-powered systems are driving decisions and improving customer journeys. The insurance industry has made tremendous progress, and while insurers are a far cry from Netflix or Uber in their use of AI,  artificial intelligence is powering a lot of digital transformation and legacy modernization.

At FICO, we have never put the technology cart before the horse. Our focus is always on the business outcome are clients are trying to solve. Increasingly, that has meant moving past point solutions and into the provision of capabilities that can be shared across use cases, capabilities like data digestion, business rules management, omnichannel communications and, of course, AI and machine learning. These are all core capabilities in FICO Platform.

In terms of the challenges facing insurers when it comes to AI, I see two main ones right now:

Execution / deployment: Gartner has reported that only 10% of analytics and machine learning models are deployed into production. That’s a shockingly low figure. For any model, being able to operationalize it at speed across the business is key. One of the advantages of FICO Platform is the ability to do just that — model development and deployment both take place on the platform, so there is no execution challenge, and indeed FICO Platform enables insurance companies to rapidly upload models deployed in a wide range of programming languages.

Explainability: The days of the black box are over. For AI models to get real traction with insurers, they need to be explainable. FICO is a pioneer in Responsible AI, and we have patented processes to ensure model explainability. Legislation is coming — of course! — as industry regulators get to grips with the need to protect consumers and businesses from the “computer says no” aspect of artificial intelligence. But it’s not just about legislation, it’s about understanding the way the model makes decisions so that insurers can be confident about applying it to more use cases.

Breaking through these roadblocks will help us realize the potential of AI in insurance. This is our key to unlocking what makes customers tick, knowing how to serve them better and bring them hyper-personalized offers. This kind of technology has benefits all across the spectrum — from pricing, underwriting risk decisioning, claims assessment and triage to fraud prevention, as well as supercharging the ‘old school’ actuarial and data science activities.

When Gooden asked if AI should be a big priority for insurers, I had a short answer: Yeah, 100%.

Learn More About AI and Decision Management

• Read our AI Playbook: A Step-by-Step Guide for Achieving Responsible AI
• Explore FICO Platform
• See Dr. Scott Zoldi’s posts on Responsible AI
• Discover our solutions for insurance