Insurtech: How AI will revolutionize life insurance

Mobile and wearable devices have revolutionized our everyday lives, providing functionality on the go for everything from personal finance to fitness. But imagine using them to save on the cost of life insurance through health tracking. That’s just one of the ways that insurtech – insurance technology – could change how we protect ourselves from life’s unfortunate events.

Inspired by the increasingly popular term “fintech,” insurtech refers to the innovations that can improve efficiency and lower costs in the insurance industry’s spectrum of activities, from underwriting to claim payments. It leverages big data, artificial intelligence and the internet, and the field is seeing explosive growth: specialist insurtech firms attracted some $2.7 billion in investment in 2015, up from $140 million in 2011, according to McKinsey & Company.

With fintech services already a major pillar of the group, Rakuten is active in the insurtech field too. On July 1, 2017,  Rakuten Life Insurance Co. launched the Rakuten Life Insurance Technology Laboratory, an organization dedicated to applying the latest technologies to the company’s business.

“In the past couple of decades as we have moved through the digital age and the social age, technology has allowed people to express their diversity more clearly,” explains Masaya Mori, director of the new lab and global head of the Rakuten Institute of Technology. “Basically, different people have different interests for anything, including life insurance. We believe we can utilize AI technology to provide different insurance services more suitable for the customers.”

One way to achieve this is to deploy AI to improve efficiency in the insurance business, which to-date has tended to rely on dated legacy systems and manual operations.

For example, whereas the industry currently relies heavily on individual salespeople to explain and sell insurance products, there is significant potential to enhance those operations with AI.

Chatbots are already being used in Rakuten’s insurance agency business to manage inquiries regarding relatively simple insurance products for pets. But the same technologies could conceivably be used for life insurance, explains lab co-founder and assistant director Kazuyoshi Hayase.

Touchpoints for existing and potential customers could also be expanded on the internet and in telephone services. Systems for fielding and answering questions on a broader range of topics could also be enhanced.

For this reason, one priority area of research is in natural language processing – the technology that enables computer systems to comprehend communication from human beings, be they questions asked of a chat bot or enquiries fielded by phone.

“As backend services become more efficient, the quality of service can be raised and there is also potential to lower costs, resulting in savings for customers,” explains Hayase.

A less obvious means of improving efficiency is to deploy new technologies, including AI, in the process of calculating insurance premiums. For example, wearable devices could be offered to customers who undertake to exercise regularly. Regular exercise could, in turn, be rewarded with discounts on premiums.

“The insurance industry has always used age and gender data to make predictions and calculations about life expectancy. New types of data provided by new devices and technologies, coupled with AI, now allow us to improve the accuracy of our calculations,” says Hayase.

Wearable devices would potentially benefit not just healthy people, but those with chronic diseases, too. People with diabetes, for example, could wear devices that track their glucose levels; those who are able to keep their condition under control could benefit from lower premiums.

“If the customers get healthier, we are happy as well,” says Hayase.

Even as buzz around AI and related technologies builds, it can be difficult to keep track of exactly how and when it will be used to improve consumers’ lives. The new Rakuten Life Insurance Technology Laboratory may be about to cast some light on the answers to these topical questions.