Alleged job cuts at Fukoku just the start of impact of AI on re/insurance

The idea that some roles in the re/insurance industry could be replaced by robots or, more specifically, artificial intelligence (AI) systems, appears to have become a reality this week with the allegation that Japanese insurer Fukoku Mutual Life Insurance will replace more than 30 employees with an AI system.

Such a possibility 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.

Fukoku Mutual Life Insurance has implemented an AI system based on IBM’s Watson Explorer, which apparently possesses “cognitive technology that can think like a human”. Its purpose appears to be to calculate pay-outs to policyholders.

Despite speculation in the wider media on job losses, the company has not been explicit in its expectations on this front so far. It has said, however, that it anticipates the AI will mean a 30 percent increase in productivity.

The reality for the wider re/insurance industry is that the implementation of AI could present both opportunities for growth and savings and the way these will combine will be watched with interest by companies considering similar technology.

The PWC report suggests that AI is already improving efficiencies in customer interaction and conversion ratios, reducing quote-to-bind and FNOL-to-claim resolution times, and increasing new product speed-to market.

“These efficiencies are the result of AI techniques speeding up decision-making such as automating underwriting, auto-adjudicating claims, automating financial advice,” the report said.

It said AI can also improve effectiveness. “Because of the increasing sophistication of its decision-making capabilities, AI soon will improve target prospects in order to convert them to customers, refine risk assessment and risk-based pricing, enhance claims adjustment, and more,” the report said, stressed that this could threaten certain types of jobs.

But PWC also said that AI’s most profound impact could well result from its ability to identify trends and emerging risks, and assess risks for individuals, corporations, and lines of business. “Its ability to help carriers develop new sources of revenue from risk and non-risk based information also will be significant,” the report said.