Insurance Firms Encouraged To Embrace AI

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The Financial Advisers Act 2008 required that financial advisers be natural persons. But in 2018 the FMA began issuing exemptions to allow the use of Robo-Advice for financial advice.

A report titled AI For Financial Insurance Services details how artificial intelligence (AI) is helping the insurance sector by automating processes and reducing the costs of regulatory compliance.

Published by the IA Forum, the report says AI is being used by some insurers in areas such as fraud detection, capital optimisation, and portfolio management. Adding that New Zealand’s insurers are at an early stage of AI adoption.

Among them is Southern Cross Health Society and its digital assistant Aimee. It was launched in November last year to answer consumer questions about health insurance online.

One New Zealand firm working with the insurance industry to develop AI systems is JRNY. The company creates digital assistants so consumers can research, buy, manage and renew insurance policies without speaking to a human being

AI Forum Report
The AI Forum report on artificial intelligence in insurance.

The AI Forum report says the software benefits insurers by increasing their sales conversion rates and reducing the cost of customer service.

Mike Lovegrove, CEO of JRNY, says in the report that he decided to provide AI systems for the insurance sector because the industry is “ripe and ready” for the technology.

He says fire and general insurance is the most straightforward for a digital assistant, but concedes life insurance is the most challenging – with a higher need for person to person interaction.

The report says AI will be “…critical to the insurance industry’s reinvention” and will help with:

  • Higher accuracy in risk assessment and pricing
  • Lowering risk
  • Reducing cost
  • Better customer experience
  • Improve productivity and/or efficiency
  • Fraud analysis and investigation

The report also says AI is one of the most disruptive forces for the insurance sector and that insurers need to redefine their business to respond to the changing marketplace, and must transform from a product-centric mindset to a customer-centric mindset.

Among the recommendations in the report are that:

  • The New Zealand government accelerate its industry transformation plans and consider a specific government-supported focused on the future of the financial services sector
  • New Zealand FinTech companies focus on developing and exporting AI-driven financial services products
  • Large banks and insurers should seek to partner with the local Fintech and Insurtech vendor community to foster AI innovation

The 47-page report concludes that AI has moved into the global insurance sector and New Zealand organisations need to pay attention.