Insurance and the double-edged blade of technology

The backlash against “tech bro” boosterism and surveillance capitalism has been slowly building, with most ire directed against the biggest targets. So it’s no surprise that the use of new technology in less exciting fields is now receiving greater scrutiny. Companies can easily misread the changing mood: the latest to do so was the insurer Lemonade, which had to issue a hasty clarification after a “poorly worded tweet” left some people with the impression that the company delegated claims processing decisions to AI and facial recognition tech.

As indignation grew, the company responded: “AI is non-deterministic and has been shown to have biases across different communities. That’s why we never let AI perform deterministic actions such as rejecting claims or canceling policies.”

This episode is an apt reminder that technology is a double-edged blade, especially when used as the basis of a company’s value proposition and thought leadership. Unless its use is explained carefully, new technology can easily be misunderstood - then linked with dystopian visions of life-and-death decisions being taken either by uncaring machines or by those with programming that embeds pernicious human biases.

This is no less a risk in sectors like insurance that had traditionally been thought of as staid and boring. In fact, insurers might be a particular target, especially as the sector had also struggled to convey an impression of human and personal service (blame actuarial science, perhaps). But as I’ve written before, both aspects of this reputation are increasingly outdated.

Friendly, accessible... insurance?

Indeed, Lemonade was a poster child of insurtech’s humane face. The company claims that as it is “powered by artificial intelligence and behavioral economics” it can “replace brokers and bureaucracy with bots and machine learning, aiming for zero paperwork and instant everything”. It’s also a certified benefit corporation; that is, one that aims to produce public benefits and operate sustainably as well as make money. Rather than profit from unclaimed premiums, it takes a fixed fee and donates whatever is left after paying claims and expenses.

Lemonade is perhaps an outlier, but the behemoths of insurance are also embracing the potential of new technology, both to streamline quotidian aspects of issuing policies and assessing claims, and in ways that aim to make the whole process of getting insured easier for customers.

In the back office, in fields such as policy processing, compliance and risk management, technologies like natural language processing and machine learning are helping remove a lot of tedious bureaucracy. Aside from the potential implications for employment, the use of this kind of technology rarely gets much attention: Lemonade’s problems came in part because it asks policyholders making claims to upload videos explaining their case, the analysis of which for “non-verbal cues” using facial recognition technology is, however you think about it, a bit creepy.

Elsewhere, across a range of sectors and with numerous collaborators, insurers are helping pioneer connected “ecosystems”. This allows them both to incorporate more information when writing policies and offer more (and more seamless) ways to buy them. In theory this should make risk management cheaper and more accessible. The range of examples is manifold, from apps to help farmers get crop insurance, to digitised, connected healthcare policies, to schemes that help cover gig economy workers (just some of the winners of the 2020 Efma/Accenture Innovation in Insurance Awards, to cite one such source.)

Caveat venditator

These examples prove that insurance is anything but conservative and faceless – in fact it is at the (double) cutting edge of technology in a holistic way seen in very few other industries. Which means it has to be especially careful in the way in which it communicates its use of new technologies.

Of course, it’s a fine line to tread: if insurers don’t make a big deal of the new tech they’re using and the new services it enables, people will continue to think of the sector as boring. If they do make it a focal point, à la Lemonade, the risk is people could end up distrusting the tech and regarding with cynicism efforts to give insurance a human face. It needs a carefully considered content strategy.