Fukoku Mutual’s Use of AI Highlights Opportunities Across the Insurance Industry

3 minute read

The benefits to insurers of embracing new technology can be significant, and are not limited to simple cost reduction.

Japanese insurer Fukoku Mutual Life Insurance’s decision to replace 34 of its claim assessment employees with a cognitive system has made headlines around the world in recent weeks. In much of the media coverage, the move has been portrayed as the first major example of intelligent machines “stealing” white-collar jobs, a grim harbinger of a science fiction-inspired future in which technology has replaced people in the workplace.

Away from the headlines, the reality is more prosaic. On Twitter Andrew Ng, vice president and chief scientist at Chinese web services company Baidu, said: “The only unusual thing here is Fukoku Insurance is talking about it rather than doing it quietly.” Indeed, a number of other Japanese insurers are reportedly already using artificial intelligence (AI) systems, although these projects only became public after the announcement from Fukoku Mutual.

The strategies pursued by the likes of Fukoku Mutual, Dai-ichi Life Insurance and Nippon Life Insurance are most likely already being assessed, if not replicated, by insurers across the globe, given the significant opportunities for automation in the industry. In a July 2016 article in McKinsey Quarterly ("Where machines could replace humans – and where they can’t (yet)"), it was estimated that “about 50 percent of the overall time of the workforce in finance and insurance is devoted to collecting and processing data, where the technical potential for automation is high.”

The benefits to insurers of embracing new technology can be significant, and are not limited to simple cost reduction. For example, another recent McKinsey report ("Making digital strategy a reality in insurance," September 2016) found that property and casualty (P&C) insurers in the top quartile for digital performance were “achieving twice the growth rate of their less digitally advanced peers and delivering better profitability at the same time.”

The initial focus for many insurers will likely be automating data-heavy internal processes; indeed, this is the approach taken by Fukoku Mutual, which is using a cognitive system to scan medical records in order to determine pay-outs. However, this should not obscure the opportunities in the front office. IPsoft’s Amelia, a “digital employee” capable of solving problems like a human, is an example of a technology platform adept at supporting both customer interactions and back office processes.

The implementation of cognitive technology at Fukoku Mutual may have led to 34 people losing their jobs but that does not mean that redundancies are inevitable in such situations. Japanese newspaper "The Mainichi" reported that Dai-ichi Life Insurance is using a similar system to Fukoku Mutual for processing payment assessments, but “it appears there have been no major staff cuts or reshuffling at the firm due to the AI's introduction.”

As the OECD highlighted in a 2016 report ("The Risk of Automation for Jobs in OECD Countries"), automation tends to target specific tasks rather than whole occupations and therefore is unlikely to result in the elimination of entire job types. Rather than looking to usurp humans in the work environment, technologies like Amelia and IPcenter, IPsoft’s autonomic IT management platform, instead seek to work alongside them, augmenting their abilities and consequently delivering significant improvements in productivity.

For over a year now, “Virtual Engineers” have been working and learning alongside staff at US insurance giant AIG, with the aim of understanding client IT environments and addressing exceptions more rapidly and intelligently over time. By the end of November last year, these Virtual Engineers had resolved more than 145,000 critical events and saved upwards of 15,000 hours of human labor.

The focus on automation at AIG is growing as it looks to move away from traditional outsourcing and embrace AI as part of a broader digital transformation strategy. Such has been the success of the initiative to date that the company is considering expanding its use of AI into other areas such as underwriting.

Discussions of automation and AI in the workplace often fall back on the narrative of "man versus machine." This may make for better headlines but, as companies like AIG are discovering, the future of work is far more likely to be "man plus machine."

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