AI centre stage again as Lemonade claims record – but no place in Guinness Book of Records

A day after the potential impact of artificial intelligence (AI) was brought to the forefront to the minds of re/insurance executives pondering the news that one large  Japanese insurer could replace staff with robots another company has looked to grab headlines around the use of AI in a different way.

Lemonade, the peer-to-peer insurer formed in the US at the start of 2016 by a number of high profile executives including Ty Sagalow, the former head of product development at AIG, has now gone public to claim a ‘world record’ for the speed of paying a claim, thanks to the use of AI.

The use of artificial intelligence and behavioural economics sit at the heart of the proposition of Lemonade, which has claimed that it has set a world record for the speed and ease of paying a claim: three seconds and zero paperwork.

The company claims that at seven seconds past 5:47pm on December 23, 2016, Brandon Pham, a Lemonade customer, hit 'Submit' on a claim for a $979 Canada Goose Langford Parka. By ten seconds past the minute, A.I. Jim, Lemonade's claims bot, had reviewed the claim, cross referenced it with the policy, ran 18 anti-fraud algorithms on it, approved the claim, sent wiring instructions to the bank, and informed Brandon the claim was closed.

"Since no international standards exist for the payment of insurance claims, the Guinness Book of World Records was unable to enter Lemonade as the World Record Holder," said Daniel Schreiber, CEO and cofounder, Lemonade. "Yet from all we can gather, in the 3,000 year history of insurance nothing like this has ever happened in three seconds. So we're claiming the title. The number to beat is now 3 seconds, and we hope others will rise to the challenge."

Lemonade noted that in most states insurance companies are bound to payout in 30-45 days. Concluding the cycle in 3 seconds is without precedent.

The claim is an interesting one because it essentially stems from the same logic that Fukoku Mutual Life Insurance is grappling with – that AI can do things faster and thus increase productivity and cut costs. This could in turn mean job cuts.

Lemonade will not experience negative publicity from doing the same because, as a new company, it lacks the legacy issues that require change and this cost cutting. Nevertheless, it represents another example of how AI will continue to potentially revolutionise the industry.

This is not new. The idea that some roles in the re/insurance industry could be replaced by robots has been mooted by some in the industry for some time. In a 2016 report, entitled ‘AI in Insurance: Hype or Reality’, PWC suggested that “over time, as AI systems learn from their interactions with the environment and with their human masters, they are likely to become more effective than humans and replace them.”

That report suggested that advisors, underwriters, call centre representatives, and claims adjusters likely will be most at risk.