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Insurance, Technology, and Artificial Intelligence

December 06, 2016

Technology and Insurance: Are You Prepared for the Coming Disruptions? This was the name for the Pinnacle Actuarial Resources, Inc., APEX webinar on December 1, 2016. The hour-long presentation by Christopher M. Holt, ACAS, MAAA, and Legaré W. Gresham, FCAS, MAAA, focused on six new technologies and their ability to disrupt the liability insurance landscape.

  • Autonomous and driverless cars
  • Wearables
  • Connected homes
  • Drones
  • Financial technology (also known as Fintech)
  • Artificial intelligence

The discussion first provided a basic understanding of the technology and where it stands in terms of development and acceptance. Then, Mr. Holt and Ms. Gresham highlighted the potential impacts on the insurance industry from a claims, regulatory, and underwriting perspective. While this was certainly focused on the traditional liability insurance market, captives are not immune from these risks nor from depending on what products they offer.

While the first four technologies discussed have already been explored at captive industry conferences, the most intriguing part of the study was artificial intelligence (AI). While AI has the ability to significantly disrupt the insurance industry, the December 4, 2016, article in the Wall Street Journal, "Artificial Intelligence Makes Strides, but Has a Long Way to Go," offered some sobering perspective. Written by Christopher Mims, the article outlines the cost benefit decisions for smaller players in the markets like captives and believes, at the lower end of the scale, the costs may be prohibitive. He also suggests that “today’s AI is at the jellyfish stage in the evolution of biological intelligence.”

While others may quibble about exactly where AI sits today, the fact of the matter is that it will only evolve and get smarter. The key question for captives is will we be able to afford the technology to compete successfully before the game clock runs out? Ongoing surveillance (no pun intended) of AI should be part of every captive's annual board meeting.
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