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Artificial intelligence is changing the world of insurance, improving underwriting and accessibility while making it more affordable for consumers. In the future, it may be able to make insurance obsolete

Advanced AI algorithms and machine learning have the power to revolutionize almost any industry, and the insurance industry is no exception. Historically, the insurance industry has been driven by mathematics; underwriters were responsible for calculating risk and coming up with rates that could reliably ensure reasonable payouts without bankrupting the company offering them.

Today, mathematical, logical, or repeatable operations are best handled by AI, but how is the insurance industry taking advantage of this fact, and how will the industry change in the future?

The current state

First, let’s take a brief look at the current state of the insurance industry, as it relates to AI:

  • Risk assessment and big data. Most major insurance companies are using more powerful AI and data analytics algorithms to calculate risk more accurately. They need to be able to pull in vast quantities of data to better understand consumer risk.
  • Usage-based policies. Modern insurance policies sometimes rely on usage-based calculations, varying your rate based on how often you engage in a specific activity (like driving). With higher-tech sensors and ubiquitously connected devices, it’s easier for companies to gauge your activity levels.
  • Virtual claims and settlements. You may also already have access to virtual portals where you can interact with chatbots to get your customer service questions answered, or file a claim online.

So how could these trends develop or change in the future?

New plans and offers

In the near future, we’ll see the development of new plans and policies. Because AI-driven algorithms will have access to more variables and more data points, they’ll be able to create more customized policies on the fly. Individuals will, instead of choosing between a small handful of options, be presented with a custom policy, specifically recommended to them based on their budget, habits, and lifestyle.

We may also see dynamic products. These may emerge as a way to differentiate insurance companies from their competitors, or as a way to put data-driven insights to better use.

Microchanges

The power of AI processing depends on the quality and quantity of data it has access to. In other words, the more an insurance AI understands about you, the better rate it will be able to offer you; not only will it be able to offer you more appropriate coverage, but it may also be able to calculate a more appropriate price.

By 2025, we’re projected to have more than 75.4 billion connected devices, and with all the data those devices will cumulatively generate, it will be child’s play for insurance companies to adjust your insurance rates on the fly. For example, a sensor in your car may indicate that you sped recklessly, and increase your auto insurance rate by 1 percent, or detect that you’re coming to complete stops consistently, and decrease your rate by 1 percent. A driver may or may not notice these microchanges as they unfold, but overall, it will lead to lower rates for some drivers, and strangely, higher profits for insurance companies at the same time.

Customer interactions

In addition to the basic customer service chatbots that are currently in circulation, future AI will be able to streamline customer interactions with insurance companies. Some of the development here will be straightforward, with advances to chatbots that allow customers to ask open-ended questions (and get meaningful responses).

Other developments may involve dynamic recommendations; a personal assistant app on your phone, for example, may be able to alert you when you engage in activity that has a chance of increasing your rates or give you advice that could lower your rate. And if you get into an auto accident, this same app may be able to walk you through the most important follow-up steps, such as taking photos of the accident or gathering information from the other party.

Automation and obsolescence

It’s also worth considering the effects that AI will have on the insurance industry as it relates to automation. Though estimates vary, most people agree we won’t see self-driving cars on the roads consistently until the 2020s. Still, when this transition begins to happen, the auto insurance industry will need to adapt. With much lower accident rates and more questionable allocations of fault, insurance will have to evolve; companies may need to work with auto manufacturers to guard them against the fault of their algorithms, rather than working with individual drivers. And if the majority of cars on the road end up being guided by near-perfect autonomous algorithms, the industry may shrink dramatically.

We’re already in the midst of a radical transformation in the insurance industry, and it’s only going to grow from here. In the near future, you can expect AI to not only change your rates and the types of policies available to you, but also the types of interactions you have with your insurance company—and whether you need insurance at all.

 

Author: Larry Alton
Source: InfoWorld


Donor funding — a hot topic at the 2018 Impact Summit. Who are your donors? How to do you reach them? What do you need to give them in return? As a nonprofit, answering all those questions isn’t always easy, but it’s important to come together and share your wealth of knowledge. That is exactly what happened during a Roundtable Discussion during Impact Summit, and one interesting thing that was brought up was non-monetary in-kind donations.

What, besides money and volunteering, can your nonprofit accept and how can you use it?

Household Goods

One of the more common non-monetary donations is household goods. When working with clients who are trying to get back on their feet, having household goods, such as couches, toasters, mattresses, or pots and pans donated can make all the difference. These items can be expensive, and having donors who are perhaps moving or updating their home give their still usable items that could have otherwise ended up in the trash can make the difference for your clients. You could also put that towards running a small shop, giving your clients the opportunity for a job training program.

Cars

Cars are considered tax-deductible in-kind donations, and usually are worth more than the average monetary donation. If the car is in good condition, your donor can write off the fair market value of the car, and there are several options for what your organization can do with the vehicle once it’s been donated.

One option is to auction/sell the car for cash that you can put towards your budget, but another thing you can do (especially if the vehicle is in good condition) is utilize that vehicle for your organization’s everyday use. Maybe you can use it to transport clients to and from programs, or deliver meals. Another option is for you to give it to a client in need so that they may have a vehicle.

Collections

What kind of collections? Any kind! Stamps, baseball cards, or even novelty plate collections can be donated to a nonprofit. From there, your organization can get the collection appraised by an authority (such as a stamp dealer) and your donor can deduct the fair market value of their collection.

A specific story told at Impact Summit by Brandon O’Neill from Fidelity Charitable involved a wine collection. After finding himself allergic to wine, a former wine connoisseur donated his collection, and once appraised, he could write off the amount on his taxes as a charitable donation. Fidelity then auctioned off the wine and put the profit into a fund for nonprofits. Opportunities like this can seem rare, but that’s mostly because many don’t know it’s an option available to them.

Real Estate

Real estate donations are great in-kind donations because of how much it could help your nonprofit organization. You could always auction it off if you get the full rights to the land, but that’s not always how space is donated.

Maybe the city donates a building, meaning you have space to run programs or house clients who need it. Maybe a performing arts center donates their stage space to your youth development programs, giving you the chance to give your clients a new thing to do that wouldn’t have been able to otherwise. Donated space can prove to make a huge difference in your service delivery.

Stocks

While this is technically considered a monetary donation, stocks are in a bucket of their own. While they can fund programs in the long run, stocks can work towards the security of your nonprofit long-term. Your donor gets to write their donation based on the stock’s fair market value on their taxes, and your organization will profit over time with the growth of the stock. Most stocks are overseen by a financial advisor, who can offer guidance on whether it’s in your organization’s best interest to sell it at any time. Unlike the typical money donation, stocks can continue to work for you after the initial donation.

Non-monetary donations can come in many different forms, and oftentimes donors don’t even know that they can donate these things. Being vocal about your organization’s needs can how people can help can lead to a wide range of in-kind donations. Sometimes, reaching out to places that can fill your specific need when you know it’s possible can also help your organization in the long-term.

 

Author: Emily Leonick
Source: Social Solutions


After years of excited predictions, at last, we are seeing the emergence of solid blockchain use cases in banking and other industries. Current trends show that greater blockchain use in insurance is on the horizon.

Blockchain, or distributed ledger technology, uses advanced cryptographic techniques to create a secure ledger of information that prevents unauthorized modification, addition or removal of data. Use of blockchain offers significant advantages over other technologies, key among them is data security and the creation of a clear audit trail. As blockchain systems are immutable and do not require oversight by a central authority, use of a distributed ledger also opens up new options for secure collaboration between competitors by removing the need for trust between third-party organizations. The key characteristics are set out below:

Blockchain characteristics

Though blockchain’s capabilities are well-established, insurers are still investigating blockchain’s potential applications within their unique organizations, as well as across the industry at large. Many are starting to recognize that blockchain has significant potential to transform the insurance value chain, creating a more secure, efficient, cost-effective, and customer-friendly experience.

Proof of concept projects and beyond

There are dozens of potential use cases for blockchain technology within any insurance firm. When investigating blockchain integration, the question quickly transforms from, “How can blockchain help?” to “Which specific use cases offer the greatest long-term value and return on investment?”. To some insurers, blockchain also presents an opportunity to challenge long-standing assumptions and rethink existing insurance business models. While most blockchain activity is still in the proof of concept (POC) stage, we are already seeing some more viable applications being tested in the market.

Early adopters have started to explore use cases which leverage the intrinsic properties of blockchain to lower operational costs related to transaction processing and improved data accuracy through increased trust between parties. One area already getting a lot of notice is the use of smart contracts, which execute automatically upon achievement of specific contractual criteria. For example, in 2017 AXA launched fizzy, an automated parametric insurance platform for delayed flights. Fizzy records information on customers’ purchased flight delay insurance using a smart contract, and connects to global air traffic databases to monitor flight statuses. If a policyholder experiences a flight delay of two or more hours as reported by airport information, the smart contract triggers the mechanism for payment upon receipt of flight confirmation by the policyholder and Fizzy automatically pays the customer. Not only does this mean that the customer is spared the hassle of filing out claim forms or speaking to a service assistant, but AXA also avoids the need to spend time processing the claim through independent verification of the claims data. At KPMG we have undertaken a similar POC with the following process flows:

KPMG flight delay claim process

Another use case already gaining traction is that of asset tracking. For insurers that cater to high net worth individuals, blockchain can provide secure and easy tracking of the proof of ownership and value of assets such as high-value collections of art, jewelry or wine.

Enabling industry collaboration

While the majority of blockchain-related activity in insurance to date has focused on internal POC projects, industry players are also coming together to investigate the viability of wider blockchain platforms. One such organization is the EU-based Blockchain Insurance Industry Initiative (B3i). B3i was originally a collaborative effort between major insurers and reinsurers to investigate potential blockchain use cases across the industry and was incorporated in March of 2018 as B3i Services AG with the goal of “[streamlining] the development, testing and commercialization of blockchain solutions” in insurance.

An excellent collaborative blockchain use case is that of fraud detection and prevention. Criminal activity often exploits insurers’ “blind spots,” where fraudulent patterns can only be detected across a wide data set, often across multiple insurers. Legal and competitive challenges have hampered insurers’ attempts to share intelligence on fraudulent activity to date; however, development of a blockchain network could provide a way for competitors to safely and securely share data, gain visibility into criminal patterns, and prevent future losses.

On the claims side, blockchain could also transform responses to catastrophic events. Where today insurers, reinsurers, and brokers need to manage masses of paperwork and electronic forms created by parties such as claims assessors, lawyers, and salvage experts, a blockchain based claims system would make the process of sharing data faster and more efficient, creating significant operational savings for all parties.

The first steps on a long road

Though we can expect to see more POCs and use case development across the insurance industry in coming months, blockchain integration is clearly only one part of the larger move toward a digital-first operating model. As experimentation continues, we should expect to see greater blockchain-related activity especially in areas strong in Fintech and RegTech such as Singapore, where the Monetary Authority of Singapore (MAS) actively encourages innovation through their regulatory sandbox and other initiatives.

For insurers looking to tackle challenges such as poor customer experience, costly manual administrative processes, and privacy and data security risks, blockchain may well be part of the solution.

 

Author: Paul Brenchley
Source: KPMG


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