Digital Insurance In Action

Japanese insurance firm Fukoku Mutual is replacing its 34-strong claims assessment workforce with an advanced form of IBM’s Watson Explorer AI. There are two primary reasons for this move:

1. AI is more mature and dependable now – The neural network that underpins Watson can calculate payouts to policyholders earlier than the human staffed claims department (albeit with a focus on a certain number of claims now)
2. The return on investment for AI is making more sense – The move is expected to increase productivity by 30 percent and save around 140 million yen per year for Fukoku Mutual.

Fukoku’s Watson system can analyze and interpret claim data including unstructured text, images, audio and video. It will be tasked with reading medical certificates written by doctors and analysing other documents such as outpatient data, surgery, procedure reports and hospital stays to draw insight necessary for calculating payouts to the policyholders.

Fukoku Mutual’s move is a case of human supervised autonomy to start with, which is intended to achieve complete autonomy in the future

In addition to determining claim payments, the system will also be able to check customer’s cases against their insurance contracts to find any special coverage clauses – a measure expected to prevent payment oversights. While the use of AI will dramatically reduce the time needed to calculate claim payouts – which totalled 132,000 for Fukoku in 2015 – the sums will not be paid until they have been approved by a human staff, a case of human supervised autonomy to start with, which is intended at achieve complete autonomy in the future.

Benefit to Customers

• Faster processing time
• Improved customer service.

Benefit to the Insurer/Partner

• Ability to analyze and interpret data, including unstructured text, images, audio and video
• Fukoku Mutual will save about 140 million yen per year by cutting the 34 staff
• Fukoku Mutual believes AI will be 30% more productive
• Switching to AI is expected to significantly shorten the time needed to process policy claims.

The effect of AI driven automation is expected to be the same irrespective of sector and business model, resulting in a complete overhaul of how jobs get done. We are witnessing the same with Fukoku Mutual, where cognitive computing is making process and rule based human workforces redundant, clearly indicating how the insurance industry will look in coming years. Although the picture is a bit hazy at this point in time, with AI reshaping underwriting, claims, and broking insurance functions, radical transformation in the way business is done is inevitable.

Having said that, one key deterrent for this transformation will be the huge investment (estimated to be 200 million yen, and annual maintenance is expected to be about 15 million yen for Fukoku Mutual) involved in the setup. How many players will risk such a humongous amount for a pilot is not too hard to guess. Additionally, how governments and regulators will react to the existential issue of Man versus Machine will also be very interesting to watch as the AI story unfolds further.

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