Sharing personal data with health insurers has become a new normal. Achieving a predetermined amount of steps per day, an active heart rate for a certain duration of time, or sharing the foods and medications taken can earn individuals lower premiums and even additional gifts from insurers happy about the mitigated health risks.
This utilization of data and AI has inspired auto insurers to create somewhat similar schemes.
AI will now enable insurers to generate individual profiles of customer risk that evolve in real-time.
Through monitoring drivers and collecting data via devices and applications, some insurance companies are already using AI to replace the traditional model of an annual premium. With the data collected, companies can create contracts informed by customer behaviour.
Zego, a start-up in the UK specializing in insurance for the gig-economy, offers a product that monitors customers after they have bought coverage and promises lower renewal prices for safer drivers.
In some cases, similar devices harnessing similar data will also become the determining factor if a company will accept an individual as a customer at all.
Root, a car insurer listed in New York, offers potential customers a test drive that tracks drivers via an application. Based on the sample data, they determine if they will insure the driver or not.
The concept is that drivers will end up paying a fairer price based on their level of risk in addition to improving loss estimations for insurers. Some companies even claim that the use of AI gives them more opportunities to influence behaviour, run predictive analytics, and identify false claims.
The use of technology will additionally speed up and cuts the cost of processing claims.
This is not necessarily a new concept. Generali, Italy’s largest insurer, has offered pay-how-you-drive policies that reward safer drivers with lower premiums for the last decade. The company further offers AI-enabled feedback within its app to help drivers improve and lower their premiums. The company plans to pilot this in other countries.
Researchers are becoming increasingly concerned, however, as this increased use of AI has the potential to create unfairness as it could likely become impossible for some drivers to find coverage. Beyond that, this disruption within the industry could undermine the system the very industry is built upon.
Those deemed riskier will no longer be able to purchase insurance and while individuals will no longer pay the claims of those most accident-prone, no one will pay their claims either beside themselves.
Nonetheless, companies like Zego argue that safe driving should push down the cost of claims and that the feedback within the app (given regularly with the most up-to-date revision of the drivers’ data) will help customers understand how they can improve to bring down costs.
Researchers are also worried about how far the use of data and AI will go and within what context. There has been talking that pictures from Instagram could potentially be up for grabs and considered in insurers’ decision-making process.
Companies have been urged by Europa, the insurance regulator in the EU, to make reasonable efforts to monitor and mitigate biases from data and AI systems.
It is up to companies and those who design the AI, feed it with data and make decisions using that information to practice strong ethics.
For the most productive use, data must be interpreted correctly within the right context, models must work for multiple different segments of the population, permission must be given by the customers, insurers and drivers must have transparent communication, and customers must be allowed to protest if they feel they have been misjudged or mistreated.
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