Machines Won't Replace Insurance Agents in 2016, But They Will Do This
Steve Anderson
Keynote Speaker | International Best Selling Author of The Bezos Letters | InsurTech Advisor | Co-Founder at Catalyit®
In this series, professionals predict the ideas and trends that will shape 2016. Read the posts here, then write your own (use #BigIdeas2016 in your piece).
I am a science-fiction fan. As a kid, I watched the original Star Trek series live on TV from the first episode in 1966. I’ve watched every Star Trek movie and almost every episode of every TV show variation of the Star Trek theme.
I guess I have been interested in the future and what it might make possible for a long time.
I continue to explore all types of technology, both tried-and-true as well as the new stuff. Is it a fad? What implications might it have in the future? Should I pay attention to it?
My focus is the insurance industry, so I also try to understand what impact emerging technology might have on how the industry helps people perceive risk and manage losses.
In 2016, we will begin to see very practical applications of Machine Learning technology as it moves away from just being theoretical.
Artificial intelligence, machine learning, and natural language processing and its implications have captured my attention. In 2016, we will begin seeing this technology move from the theoretical into practical applications. We will also see the cost significantly drop so smaller organizations can take advantage of its capabilities.
IBM’s Watson Platform
I’ve been following with interest the development and growth of IBM’s Watson platform. IBM describes Watson as a “cognitive system” that can help us “outthink our biggest challenges.”
Watson Wins Jeopardy
I first became aware of Watson in February 2011 because of the Watson Jeopardy Challenge. It was fascinating to watch Watson play Jeopardy against Ken Jennings (longest winning streak) and Brad Rutter (biggest money winner). Watson ultimately won that challenge.
Watson seemed like an interesting experiment. Are machines better than people at processing vast amounts of data in real time? Can they replicate (or maybe replace?) the human decision-making process in certain circumstances?
The Watson platform has continued to develop. Its “cognitive system” is now available for use by other industries through its API access. One of the biggest users of Watson is for medical diagnostics. Because of its advanced image analytics capability, Watson can now “see” medical images.
The insurance industry is also looking at how Watson might be able to improve the underwriting process and financial results for an insurance company.
"It [IBM Watson] will do a whole lot of work and very quickly. There will be more accurate underwriting, and to a certain extent, it probably removes some human emotion in terms of decision making too," Mark Senkevics, head of Swiss Re Australia and New Zealand.
In this article, Senkevics explains why the global reinsurer plans to engage IBM's artificial intelligence system, IBM Watson, to assess life insurance risks in Australia.
Machine Learning Examples
In November, I attended the ACORD 2015 as a judge for the ACORD Innovation Challenge. I had the opportunity to listen to Jared Cohen’s keynote presentation. Cohen is the Director of Google Ideas and the co-author (along with Google executive chairman and former CEO Eric Schmidt) of "The New Digital Age: Reshaping the Future of People, Nations and Business."
Cohen spent a majority of his time talking about how Google is using machine learning in many areas, including image processing (Google Photos) and Google Driverless Cars. If he spent that much time talking about machine learning, then it just might be something I should spend more time exploring.
Other recent news items about the advancement and development of machine learning include:
- How Banks Use Machine Learning to Know a Crook's Using Your Credit Card Details.
- Elon Musk Donates $10 Million to Keep AI Beneficial.
- Machine Learning Works Great—Mathematicians Just Don’t Know Why.
- Google open sourcing its artificial intelligence engine — TensorFlow — last month freely sharing the code with the world at large.
The week Google made the announcement about TensorFlow, I was facilitating a meeting of large U.S. insurance brokers in Houston. At dinner the first night I was talking with an IT person from one of the brokers about TensorFlow and its possible implication for the insurance industry. He told me he had already downloaded the code that day and was “playing around” to see how it might be used in their operation.
People don’t need you for information… They need you for advice.
Terry Jones, CEO Kayak.com
Machine Learning Available for Any Size Organization
Recently I spent the day at a small company that is developing an expert conversation engine tool that will allow anyone to create a “guided conversation.” In artificial intelligence terms, this type of process is properly called, "Forward Reasoning," sometimes also referred to as "forward chaining."
Using their platform, I was able to create an online conversation that created a guided conversation that answered the question, “I bought a new boat. Does my homeowners policy cover it?” Building the response to this question took about an hour for me to complete.
The questions I asked included:
- What type of boat did you buy?
- Does it have a motor? If yes, what is the horsepower?
- How much did you pay?
Based on the answers provided, I was able to use this tool to capture my insurance expertise (I have a Masters in Insurance Law) and display a customized page that showed the coverage available — and what was not available — under several different types of homeowners policy forms, including both physical damage and liability coverage.
I was able to answer the question asked and also show where additional insurance coverage was needed.
Once you learn how the tool works, anyone should be able to create simple conversations like this in less than 30 minutes.
More complicated conversations (like an annual account review process) would take longer to develop. The additional time required is due to the difficulty (at least initially) of capturing the expertise required and understanding the logical flow of the conversation.
However, once the guided conversation is created, it can be used many times by both internal employees who don’t have the experience as well as clients who have a question.
Machine Learning Benefits
Many people will look at these advances in machine learning as scary.
They will say that a machine can never do their job. A machine will never be able to provide the same type of value that an actual person can. I am not so sure that is the case.
Don’t you think that is what Ken Jennings and Brad Rutter felt when competing with Watson on Jeopardy? Yet, they lost.
Here are some ideas about how machine learning will benefit insurance agents and the industry:
- The ability to capture the knowledge, skills, and expertise from a generation of insurance staff before they retire in the next 5 to 10 years.
- A new way to answer questions about insurance issues from a new generation of consumers. These consumers expect to be able to get answers anytime — not just when an agent’s office is open.
- Provide consistent — and correct — answers to common insurance questions. You will not need to monitor varying levels of expertise.
- Be able to attract new talent by providing a career path that automates the mundane so their time and effort can be spent on engaging clients at a deeper level that requires more in-depth expertise.
- Allows insurance agents to deliver their expertise to their clients more profitably. This is especially true for individual insurance (personal lines) and small business insurance (small commercial).
- Allow agents to create and deliver an annual online account review process for both personal lines and small commercial insurance accounts. This is a vital process for client satisfaction, creating cross-selling opportunities, and reducing errors and omissions problems.
- Creates a way for every insurance agent to provide 24/7 access to insurance knowledge and expertise. A guided conversation provides a much better experience than a simple Frequently Asked Questions (FAQ) page. You will be able to create an interactive, customized value-added experience.
There may be some who read this article and think artificial intelligence and machine learning will be the end of the insurance agent as the trusted adviser for providing proper protection against accidental losses.
Like Mark Twain, I think the death of the insurance agent has been greatly exaggerated.
Those insurance agents who embrace new technology and find better ways to engage with the consumer will always find opportunity.
The Opportunity
Those insurance agents who embrace new technology and find better ways to engage with the consumer will always find opportunity. For those agencies that can see the opportunity, machine learning tools will provide another way to engage and interact with the digital customer.
I do not profess to be an expert in Artificial Intelligent or Machine Learning. The growing evidence tells me that this technology will be available sooner than we think. In 2016, I will be spending more time learning about machine learning technology to better understanding the implication — and the benefits — to the insurance industry.
I do not believe this technology will replace the need for insurance agents. Today’s consumers demand value. They want to engage with people who provide products and services. And they want it when they want it. Anytime, day or night.
For insurance agents who are simply “order takers,” machine learning will likely be a threat. It will be much harder for them to justify why anyone should do business with them.
Machines that can learn just might provide an edge insurance agents need to compete effectively in a 24/7 world.
What do you think? Will you be able to talk to a computer like Captain Kirk did on the Starship Enterprise? Don't agree? Let me know why.
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Steve Anderson is an authority on insurance technology. He is a prolific writer and frequent speaker known for his knack for translating “geek speak” into easily understood concepts. Check out his free weekly newsletter “TechTips” and other resources on his website.
Photo credit: Courtesy of IBM
Chief Sales Officer, Member of the Management Board
7yThank you very much for the interesting article! I have followed the development of artificial intelligence myself for a while now and totally agree with your observations. Machine Learning can be twofold especially when it comes to the decisive question man vs. machine. But in complex surroundings like insurance issues there are in fact undeniable benefits for a new, digitally oriented customer. Customers nowadays use the digital options available in a way that is quite sophisticated and gives room to machine learning systems. If you are interested in how digitization affects the interaction between insurance companies and their clients, you can read more about this in my article, “The Insurance Customer – A Hybrid Being.” http://arva.to/scbSt
insurance and business development
7yThis was a great insight into the effects or technological age.However insurance is a relationship based.Trust.
Sales Growth Strategist! Using Innovative Training & Coaching Models Guaranteed to Improve Onboarding, Conversions, Referrals, Retention and lower your CPA.
8yIt's very simple; computers will never replace people entirely because they lack the ability to think and they have no instincts. They can only return what is put in. A GPS is a good example of how they fail in that area, it will instruct you to turn the wrong way down a one way street or continuously try to send you back into traffic you're trying to avoid. Until a computer can think, some of us are safe. ; )
Insurance and Financial, Community Building, People Connecting- So We All Can Live Well
8yThis is a huge stride for Companies which embrace and have developed identifiers for customer segmentation. Customers who chose to engage the technology more heavily than the Agent are clearly not relationship seekers. The benefits to both the Agency and Company side of the interests can be realized as long as there is seamless interaction for those customers who want to graduate from price or convenience shopper to relationship builder. I clearly see the advantage of coaching payment and price only customers to utilize the technology for many tasks but, as an Agent, I want to keep my welcome door always open for the segment transition clients. Lastly, we need to have workarounds to the intellectual risks presented with rigid adherence to data only decision making. We need to be careful and not become a "Simon Says" industry, economy or society.
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8yFor those of us like yourself who are big Sci-Fi fans, people will remember examples of machine independence, replicators, the hive dominance, all in contrast with Star Trek where there was still a crew which was in charge. NASA uses robot spacecraft otherwise know as un-manned, but there are a great many people employed behind the scenes to support and evaluate the information received from those missions. Does AI jeopardize most of those current jobs? Maybe some, but maybe it creates others? Insurance is commonly thought of as a commodity business for those who are not dealing with the most complex of one off custom designed coverage forms aka (manuscript endorsements). As such, the most difficult part of searching for the best coverage, at the best price can certainly be automated sending most of us to the trash bin, but the attorneys have created such a tangled mess of words, punctuation, terms, conditions, limitations and exclusions, that those working to simplify it all, have often been frustrated as their vision has come crashing into the solid wall of reality - this is a monster of a task. Younger far more tech savy and tech addicted consumers are written about as being different from their elders. In fact that is not true. What is changing in our world is information, and technology, much more so than humans and our desires. It has always been true that having had a negative experience, people will tend to share that broadly unless it is so embarrassing to them that they prefer to keep it a secret. Now with social media and anonymous posting that stigma is eliminated, so negative comments or reviews can trash a reputation rightfully or wrongfully in an instant. That is a game changer, but nothing new, just a super amplification of the old. Having been an independent agent since age 18, at 45 years in, I would be considered old school, and ready to move off into retirement. However, I saw back in the dark ages that our business was far behind others in it's ability to communicate, and it has generally failed to understand the long term benefits of aligning itself with the consumer's needs. We have not yet been able to achieve the most basic acceptance of a dec page coverage check list that would help eliminate coverage errors, and allow everyone to better understand what the heck they bought. Of course some could say that's our job as agents/brokers, but most courts have ruled to the contrary - that the policyholder is responsible to understand what they need, and what they purchased. It's a major area of conflicting interests as we agents/brokers want to be known as "professionals and experts" but we don't want to be held to that standard of legal responsibility when we get sued. The one constant with consumers (which is all of us) is we tend to demand more for less over time. Some of us care a great deal about brands, others don't. Some differentiate based on quality and value, others don't. In a world where everyone claims to be the best, and there is questionably little if any truth in advertising, the agent's biggest challenge is to demonstrate value. Consumer behaviors teach us that will continue to mean different things to different people. Only a short forty some years ago, next to no insurance agency had a single computer. Trade press visionaries were telling us what our future may be like, and how we should plan to be the next ""buggy whips". They were all wrong. We are constantly being written off, and we respond by constantly adapting to consumer demands. The biggest revolution which has not yet come is the end of agency as we know it now. If all insurers made their products available through any agent, like airline tickets are, then ended the commission system, so those products would all delivered from the insurer's at net cost. Then each agent/broker would charge a negotiable fee like attorney's due. Agent income would no longer be controlled by insurers. Service demands would determine agent fees, not random premium size. Of course agents and brokers who are now living large on the fat of the traditional system will never welcome such a change, but those of us who are here to serve the consumer certainly would welcome it! My guess is that what Google and every other self proclaimed genius out there will eventually learn the hard way is that insurance is not all BS. Certainly achieving new and greater efficiencies will drive increased profits, however, those nasty claims, government agencies, and class action lawsuits just won't go away. VIA since 1956, always a consumer advocate, here to stay!