Robots & AI pose unique Challenges to the Insurance Industry

Robot meets humanVarious degrees of automation have been occurring in several commercial and industrial sectors for some time. Mechanisation saw the loss of millions of jobs in agriculture and manufacture, and with the rise of computers, many white collar workers have joined the ranks of the newly redundant. It is estimated by The McKinsey Global Institute that up to 25% of all jobs in the insurance industry will be automated within a decade. The hardest hit will be the sales force, with an estimated 60% of the tasks undertaken by sales professionals being capable of automation.

HAL is coming for your job

In Japan, which is generally the first to adapt to and adopt new technology, the process has already begun. Japanese insurance firm Fukoku Mutual Life Insurance has started using a completely automated system to calculate pay-outs, rendering 34 human workers redundant in the process, at an estimated saving of £1 million a year. Furthermore, the system is much faster than human workers, decreasing response time (and presumably increasing customer satisfaction) to seconds. The final pay-outs do have to be confirmed by a human member of staff, however. Dai-Ichi Life Insurance also uses an automated system, although it has not reduced staff numbers, and Japan Post Insurance is also investigating such an option.

It is estimated by Nomura Research Institute that nearly half of all Japanese jobs will be replaced by automation.

Europe is not lagging too far behind, as Swedish bank SEB has been using an AI for customer relations since 2014.

Could such systems work in Europe or the US?

Barring legal protection of jobs from automation, there seems to be no reason why they shouldn’t. Yes, there is the argument that people are more likely to buy insurance from a human than faceless artificial intelligence. But they’d have to be a LOT more likely to prefer dealing with humans to get the companies to ignore the potential profits. And they are large.

The savings to the company from automation are enormous, with returns on investment, in the case of Fukoku, in only two years. However, before you grab a leather jacket and start preparing for the Terminator, the brainy folks at McKinsey Global Institute recommend that we not start panicking immediately.

It is possible that we can have our cake and eat it too

AIs replace activities, not necessarily professions. Amelie, the AI at Swedish bank SEB, does have the option of calling in a human worker when she finds herself stumped by a question, or should the customer request it. By automating a lot of the grunt work in the insurance industry, such systems could leave human workers with MORE time to do the things humans still do better than robots, such as strategise and interact with other humans.

So, insurance workers may not only keep their jobs, but may also happily find that the more repetitive and tedious aspects of it have been removed. Naturally, however, there will still be considerable reduction of the workforce.

Furthermore, insurance consumers will benefit from industry automation. As the cost of doing business is reduced by automation, market forces such as competition between companies will very likely result in lower prices. Although, one does wonder how the consumer can be expected to purchase such products if automation keeps replacing human workers in every industry in the world, but that is a problem for the future.

Make no mistake about it: the threat is real. The Netherlands, Canada, Namibia, India, Brazil, and several states in the US have already experimented with a guaranteed basic income as a response to automation. France and Finland are considering such experiments and a full 65% of the population of the EU is in favour of such a programme.

The nature of work is changing, and the insurance industry is unlikely to be an exception. While some will lose their jobs, it is likely that those remaining will find themselves thinking, planning, talking and interacting more, which plays to the advantages that humans have over machines, rather than the other way around.