Blog: Pop goes the bad rep - How Lemonade and AI are putting the fizz in insurance claims


  • Lemonade used AI to settle a claim in three seconds
  • Fukoku Life is replacing staff with IBM Watson

In the first weeks of 2017 two stories have really caught the imagination of the insurance claims community.

One involved US peer-to-peer insurtech start-up Lemonade, which claimed it had set a world record for the speed and ease of paying a claim at three seconds with zero paperwork.

Now, I am uncertain such a record officially exists, something the business acknowledges, but as a bit of provocative PR it certainly got the tongues wagging and some social media users all flustered commenting on how the lack of human intervention and ease of process could open the business up to significant levels of fraud.

Others were left mulling what the 18 anti-fraud algorithms Lemonade ran on the claim for a stolen parka, and what AI Jim, Lemonade's claims bot, might mean for the future of those employed in insurance.

Coincidently, this question might have already been answered in part by the second story I was referring too.

That one featured the Japanese mutual Fukoku Life and its announcement that it was planning to cut a number of jobs having introducing AI system IBM Watson. The firm said that the technology is already being used to analyse customers' voices and handle complaints, with the aim of "improving the accuracy and efficiency" of its operations.

In effect it has been posited that this is the first evidence that the Oxford academics behind The Future of Employment: How Susceptible are Jobs to Computerisation? were right when in 2013 they numbered those working in insurance claims and policy processing as the 14th most susceptible employees to the rise of AI. Underwriters were ranked nine places higher.

But before we get too ahead of ourselves as to the imminent replacement of staff by machines, those that were quick to dismiss Lemonade's AI Jim as a gimmick should also bear in mind the insurer recognises that this technology is far from flawless and three seconds is likely to be far from the norm. "As we often experience from the likes of Siri, as smart as algorithms may be, they aren't always perfect," the company wrote in a blog post last year.

"This is why we only use our claim algorithms to help us reach one single decision: should a claim be handled automatically or not. AI Jim will either pay claims instantly or call in the human Jim to take charge."

And there you have it, the crux of the matter which many who got their pants in a twist over the ‘three seconds' claim blog seem to have missed.

Surely insurers should be doing as much as possible to help legitimate claimants have their monies paid promptly with as little effort as possible?

It is often said insurance has the reputation it deserves, and to many that is of an outdated and consumer-unfriendly industry, which will try its utmost to put barriers in the way of paying out money. And if it does pay a claim, it will only do so after sitting on that money for months accumulating interest for personal gain.

Technology like AI and other digital innovations are a reality and those insurers that look to adopt them and accept the dawn of the new insurance era will be the ones that connect with their customers and become part of a new vanguard looking to change this - possibly outdated - perception about insurance.

Yes, there will be some processes that get automated and some staff will be impacted. But far from painting a doomsday picture, perhaps there is a more positive angle to spin about the adoption of technology in that it will free up staff from doing menial and unrewarding tasks. And instead it could release their shackles and allow them to be more client-focused and creative.

So that we get to a situation that is not quite Terminator: The Rise of The Machines, but more The Fast & The Non-Spurious: Gone in Three Seconds...

The use of chat bots and the exposure of start-ups to fraud are among two of the subjects the Post Claims Club will feature at its next meeting, which will discuss the future of claims in a digital insurance market. For more details and to sign up, click here.

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