COVER Magazine: Technology and Innovation Forum 3rd April 2019, Technology and the “Protection” industry

Life protection, health insurance and income protection insurance are often overlooked areas of the financial sector. The industry constantly worries about the “protection gap”: that fewer than 35% of the population have any protection insurance cover, either provided by their employer or bought by themselves.  This event, organised by the leading industry magazine COVER, set out to explore whether new technology could change this.

Artificial Intelligence (AI) is making inroads into so many areas of life, and so many professions, that naturally the Forum began with a Keynote talk about it – “AI methods for evidence-based risk assessment”, delivered by Professor Sophia Ananiadou, Director of the National Centre for Text Mining (NaCTeM).

In what was quite a dense and challenging talk (I’m sure I wasn’t alone in losing track of the details), the Professor explained some of the key principles of text mining and their applicability to underwriting, using health records.  She discussed how “explainable” AI could be applied, at least in specific domains such as biology and chemistry, with semantic metadata adding structure to the analysis.  In particular, she talked about THALIA, a semantic search engine that can recognise concepts occurring in biomedical abstracts indexed on Pubmed. She covered a number of examples of how text mining can help quantify mortality risk.

In the second session, David Vanek CEO of Anorak talked about robo-advisors and digital advisors. Referring to a previous COVER article “The Rise of the Robots” he argued that while big data and AI could add extra analysis to the economics of advice, it was clearly necessary to have a combination of online and offline services to support customers. He acknowledged that automated systems could link with bank accounts and other information sources to identify changes in customers’ circumstance, but argued that selling protection required an emotional connection and a very personalised, responsive approach.

The last of the pre-coffee sessions was Paul Huggett, Commercial Director of Rocketer talking about how social media could be used to close the “protection gap”: remarkably few people have income protection. He described how some paid social media advertising could address the 40m UK Facebook and 29m Whatsapp users. These approaches were fairly standard online marketing techniques.  The concept of “life triggers” was interesting  – analysis of social media content could tell you for example when someone bought a new house or had a child, giving you a key moment to attract them to your protection product.  He also introduced the concept of “look-alike audiences” – people whose characteristics were similar to your existing customer base, and so who might be seen as more likely to buy your product.

After coffee (and it has to be said some excellent pastries) there were two panel discussions. The first, with Paul Yates of iPipeline, Adam Higgs of FTRS and Paul Huggett, addressed the question of “knowing your customers”. They discussed how algorithms could produce better pricing and risk models and how Google Analytics etc could help you see the profiles of your customers and contacts. They view AI as a kind of sophisticated calculator, helping you find efficiencies, but essentially a back-office activity. Chatbots might have a role, but the panel thought human advice was vital. In the Q&A a question about diversity came up – this to a panel of balding white men. Everyone agreed (!) that more transparency and diverse approaches, avoiding a “one size fits all” model was required.

The second panel session looked into “direct-to customer” (D2C) sales, and how it fitted with the advisor market.  There was general agreement that a “blended” approach combining online and offline contact, depending on the needs of the client, was best. There would be different levels of complexity and hence of confidence, so the first contact needed to be a “triage” to determine the best channel to use. Only those with “clean lives” could be dealt with online.

The discussion covered several issues. There was a feeling that the way the industry tackled issues of mental health was not sufficiently nuanced.  The view that AI could never replace the emotional contact of an agent surfaced again.  My feeling was that this session hadn’t really got to grips with the radical changes new technology was going to bring – the D2C discussion was well behind what other industries already do, and the attitude to AI bordered on the complacent.

In his round-up comments, Adam Saville, COVER’s editor, identified the project that SAMI are doing with the Chartered Insurance Institute on the digitalisation of medical health records as a key way of improving access to protection. The ready availability of information on health conditions should provide benefits to consumers, GPs and underwriters with faster, more accurate assessments. This could underpin even more radical change.

Written by Huw Williams, SAMI Principal

The views expressed are those of the author and not necessarily of SAMI Consulting.

SAMI Consulting was founded in 1989 by Shell and St Andrews University. They have undertaken scenario planning projects for a wide range of UK and international organisations. Their core skill is providing the link between futures research and strategy.

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