Talk to many leaders around the insurance industry, and one technology trend stands out as poised to make a big impact in 2017: Artificial intelligence.

Consider that two of the Global Insurance Accelerator’s 2017 Cohort class of six (FindBob and MotionCloud) offers AI as part of their core offering. They and other companies entering the insurance sector can thank to the amount of (big) data insurers have been collecting over the past decades, as well as the recent increase in computing power and sensors everywhere, for paving the way for this development.

Much of the hype around AI relates to underwriting. We know some larger carriers are already employing intelligent automation, and the results are notable. But they aren't without their trade-offs.

In Japan, Fukoku Mutual Life Insurance is replacing the labor performed by 34 employees (calculation of payouts to policyholders) with IBM’s Watson Explorer AI. The insurer predicts an increase in productivity by 30% and a return on its investment in less than two years. The AI trend is growing steadily in Japan, with the Nomura Research Institute predicting that nearly half of all jobs in Japan could be performed by robots by 2035.

But AI is not the end-all, be-all solution to improved customer service, increased sales or productivity issues, industry experts warn. “AI is not good at answering the type of questions that require an ability to grasp meanings across a broad spectrum,” Noriko Arai, a professor at the National Institute of Informatics, told Kyodo news agency as part of the Fukoku Mutual Life Insurance news.

In the United States, AI-enabled Intelligent Personal Assistants (IPAs), such as Geico’s “Kate” or Grange’s partnership with Amazon on its Alexa platform, are also making news, designed to facilitate improved customer service, which, if you ask most any policyholder, is sorely needed.

Agents, having scrambled to compete against the wave of modern technologies such as mobility and self-service portals, are understandably not crazy about AI-enabled personal assistants. But, notes Steve Anderson, ACT Changing Nature of Risk Work Group Co-Chair at Independent Insurance Agents and Brokers of America in a recent blog, “Those insurance agents who embrace new technology and find better ways to engage with the consumer will always find opportunity.”

In fact, engaging with the consumer creates the primary opportunity. In other words, a certain amount of interpersonal interaction will always be valued by the policyholder, no matter his or her demographic profile. And while it’s effective to understand how demographic information informs the prospects needs and requirements (such as the preference by millennials to swipe on, swipe-off insurance), it’s the human factor that matters.

Why? Because, by its nature (especially in personal lines) the insurance industry is a trust business. An IPA can’t reassure a concerned parent of a new driver, or suggest better options among a host of complex options, or help the prospect better understand coverage limits.

“This is the work that machines and automation can never fully displace, and that carriers continue to value, even as efficiencies are gained through robotics and automation,” note NTT Data authors Lisa Woodley, VP, Digital Experience, and Joel Collamer, VP, Insurance Consulting Practice Lead, in their thought leadership paper, “The AI Revolution in Insurance: A Reality Check.”

The authors urge insurance industry stakeholders to think enhancement, not replacement. “Rather than replacing employees with robotic agents, insurance companies should invest their IT dollars to enhance the performance of agents and underwriters by providing them with better data and tools. Free the humans from the mundane administrative tasks easily handled by a machine.”

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