It is still “early days” for most insurers in Canada when it comes to employing artificial intelligence (AI), but exploration and use of the techniques is accelerating very quickly, Greg McCutcheon suggested Monday during InsurTechTO in downtown Toronto.
“I would say the majority of insurers are still within the incubator and R&D mode, to a lot of degree, here in Canada,” McCutcheon, president of Opta Information Intelligence, told those attending AI and Analytics: A Competitive Edge through Deeper Insights.
“With the exception of the ones that have actually created their digital garages or their R&D labs, which we’re seeing pop up, it can be difficult within traditional insurance companies – the platforms that are still being utilized – to drive out this type of work,” he pointed out.
Those “early days” may also be the result of some organizations not having “employees who actually know how to use artificial intelligence, or use more modern, open-source development platforms, to be able to get the most out of big data, or be able to access data,” McCutcheon noted.
Still, “it’s accelerating faster than I’ve ever seen it,” said McCutcheon, who has been involved in servicing the insurance industry for almost 25 years.
“I used to complain bitterly about how slow we move from a technological perspective, and now we’re keeping up as fast as we can,” he noted.
Every jurisdiction will have its own artificial intelligence journey, but there are many similarities between the U.S. and Canada, Philippe Lafreniere, senior vice president of EIS Group, suggested during the conference session.
“I think the similarities are that we’re all looking to address the same challenge. How do we improve efficiencies? How do we get better insights? And AI is one of the key mechanisms to get us there,” Lafreniere maintained.
In the U.S., he told attendees, “there’s so many players, there’s so much capital that’s been invested that I think it’s on a much bigger scale similar to what we’re seeing here with some of the pilots,” related to claims and underwriting.
“The markets are very similar in terms of the distribution and products and the demographics,” Lafreniere said. “I don’t think we’re really that far behind; it’s really a factor of our size,” he added.
Although developments like artificial intelligence and the Internet of Things can feel overwhelming at times, “it is critical that we get a strategy,” McCutcheon suggested.
“Don’t try to boil the ocean,” he advised, recommending, instead, to focus on something specific to make the process more manageable and move things forward.
“What are you trying to solve for?” he asked. “You can take this and make it very meaningful to a certain aspect of your business,” McCutcheon explained.
“Let’s start with something small, let’s get it proven… let’s take one use case,” Lafreniere suggested during the session.
For his company, which is in the core systems space, “essentially, we’re saying let’s dabble in these technologies, let’s dabble with these things and let’s react quickly. Let’s make sure we implement this in a way that will allow us to adjust quickly to the environment that’s changing around us,” he noted.
“From a competitive perspective, in the insurance industry, if you’re not using these modern techniques and do not have a digital or insurtech strategy, you’ll be left behind very, very quickly,” McCutcheon cautioned.
“As we look at all that’s happening and all that’s being driven by insurtech, and specifically AI, our customers look to us,” Lafreniere said. They are asking, “How ready are you to co-exist with these solutions?” he told attendees.
“It is definitely changing the area of focus, it’s changing the conversation and it’s also changing messaging,” Lafreniere reported. “What is the role of that core platform in this new world in terms of what you’re trying to do as an industry, what an insurer is trying to accomplish with their digital transformation,” he said.
“Those things that were of interest 10 years ago, they’re not forgotten. They need to be there, they need to be robust, but, definitely, the focus is on a much different set of questions, set of capabilities,” Lafreniere added.
“We’ve seen a lot of movement on wanting to, basically, look at the customer base and segment customers in a more powerful way,” McCutcheon reported.
“When we’re trying to reach out and market to people or offer certain coverages, understanding who they are and what would be the best benefit mutually between the customer and carrier and probably triparty, the broker, is another use of this,” he said.
At its heart, it is “just the ability to use computer processing at a faster pace to drive decisions,” McCutcheon emphasized.
“When it comes to these new technologies and how they make their way closer to the back office and core processes, I think the importance of agility escalates dramatically,” Lafreniere suggested.
McCutcheon noted that policy management replacement projects can take years. In the interim, his suggestion is to form a “subgroup of people that are focused on R&D and give them as cost-effective as a platform to work in as possible.”
Choose a use-case of what the company is trying to sell for, get the subset members to “work on that in their lab or create a lab environment” and use third-party vendors that can provide expertise. “You can’t bet on every horse on the track and you can’t lose track of what your core business is and get too focused about this and lose your edge.”
Insurtechs and their new ways of looking at things is providing a positive challenge to incumbents, Lafreniere suggested.
“I think it’s for the greater good, because it has definitely raised the bar in terms of usability, customer experience and user experience,” he said. “The speed at which new examples have come to market” is also a positive driver for companies, including his own, to “react a lot more quickly than we historically have,” he noted.
“They’ve raised the bar for everybody. It’s survival for us; it’s survival for the incumbent insurer,” Lafreniere emphasized.