Insurance industry was always considered a 'Godzilla' with a lot of manual processes, agent dominated sales and archaic models of risk underwriting. It was only natural that artificial intelligence (AI) would find a lot of easy pickings for disrupting the insurance industry.
And it looks like the flood gates of innovation have opened with a number of interesting AI companies doing some super awesome stuff! On one side, powerful machine learning algorithms underwriting risk in real-time are threatening actuaries in the industry and on the other side, drones and autonomous vehicles are changing the way people make and manage claims.
Whatever be the case, #InsurTech happens to be riding this wave to lure customers and investors alike. Here is a glimpse of money flowing into the insurtech industry (Source: CBInsights)
While a lot of companies have made their mark in this space, here is a list of few startups that we are personally tracking:
Pay-as-you-go auto insurance coverage
Auto insurance companies are not operating in a sustainable fashion and the only way they can resolve that is through technology. Metro mile's technology automates the collection of statistics like distance traveled, driver behavior and usage patterns to rationalize auto insurance coverage.
Maybe that’s why venture capitalists are pouring money into Insurance Technology or “InsurTech”. Why is this so meaningful? Take the below excerpt from a recent report by McKinsey titled “Time for insurance companies to face digital reality“:
US auto insurers have already lost on average $4.2 billion in underwriting profit a year over the past five, with expenses and losses consistently outweighing premiums. They should expect further annual profit declines of between 0.5 and 1 percent if they fail to use digital technology to improve efficiency and effectiveness.
Instant Home Insurance
Founded in 2015, New York-based startup Lemonade has taken in $60 million in funding so far from the likes of Google, Allianz, and Sequoia Capital. Lemonade is a licensed insurance carrier offering insurance to renters and homeowners exclusively through a chat-bot app for smartphones. Lemonade's virtual assistant 'Maya' helps customers buy renter insurance and also processes claims based on chat conversations. Lemonade is trying to fully automate the pre and post sale customer engagement.
Handwritten paperwork to digital
Founded in 2011, Captricity has developed machine learning algorithms that can extract and transforms data from handwritten and typed forms at a mind boggling +99.9% accuracy. Here are a few comments about Captricity’s value proposition from Forrester analyst Ellen Carney that first caught our attention:
For one carrier, the company has digitized a half million new business applications, speeding up the quote-to-bind process and producing a 50% drop in staffing costs. For New York Life Insurance, Captricity extracted cause-of-death data from 10 years of paper death certificates that the insurer is using to refine its life actuarial models.
Capturing and analyzing historical policy data improves underwriting accuracy which is why 50% of the top U.S. insurers now use Captricity. It is certainly exciting to see a startup actually taking advantage of all that paperwork :).
Quantifying cyber risk
Founded in 2014, Silicon Valley startup Cyence has taken in $40 million in funding so far to develop an analytics platform that can quantify the financial impact of cyber risks. Insurance is all about managing risk and one of the biggest operational risks companies face is cyber-security. A single hacker can steal information that might be worth billions of dollars to a company (remember GoT, anyone).
As an insurance company, assessing cyber risk and quantifying potential loss is always challenging. Cyence offers industry’s first platform that quantifies cyber risk using 'probabilities' and 'dollars'. Volume of big data that would need to be analyzed in order to come up with such information is where machine learning algorithms rule the roost. Cyence looks very interesting because they are building a solution for 'known' unknowns that are so difficult to forecast.
Monitoring drivers via smartphone
Did you know that 1 in 4 collisions result from phone use while driving? Founded in 2013, San Francisco startup Zendrive has taken in $20 million to develop a technology that uses sensors in your smartphone to measure and improve driving behavior. Machine-learning algorithms turn that sensor data into real-time, actionable safety insights. Insurers love this company because it helps them reduce claim settlements.
BTW Zendrive did a cool 3-month analysis of 3-million anonymous drivers, who made 570-million trips and covered 5.6-billion miles. What they found was drivers use their phones during 88 out of 100 trips. Here are the states where the worst offenders reside:
For those readers who aren't color blind, essentially this tells you to stay off US roads :)
At AskArvi.com, we are inspired by all these success stories and believe that we can offer a lot of value to Indian customers by merging AI with the Indian insurance industry.