Viewpoint: Does Artificial Intelligence Know Who’s Barn is the Next to Burn Down?

By Tom Quirk | January 31, 2020

I shudder at the thought that an algorithm developed by artificial intelligence will allow the insurance industry to no longer spread the risk among all policyholders, but stick it to the few whom the data points identify as the most likely problem.

Back in the 1800s, when the barn burned down, it was nice that the entire community came to the aid of that one farmer.

Television advertising by State Farm is working hard to condition us into thinking that quarterback Aaron Rogers’ driving discount does not need to be made up somewhere else – see Arron was not going to have a wreck this year anyway, but State Farm will still pay losses, year in and year out, at a very predictable level. This means that any discount to Aaron Rogers must be charged elsewhere to some other driver that either drives faster or refused to give up all of the data gathered by the device installed in Aaron Rogers’ vehicle.

As to the question about who owns the data? I would believe that you have signed away your rights to the data when you approved the device with hopes that a premium discount was on the way.

Policyholders are not insurance experts. Most people will have few if any claims throughout their entire lifetime. We foolishly think that we can simply write up a few lines of advice on a web page and these otherwise intelligent people can negotiate their way to a successful claim settlement when up against a claims professional that works hard to pay out the minimum possible.

Left on their own to complete an employee dishonesty loss with Chubb, my client received only 50 percent of what they were entitled. I am embarrassed to say that we didn’t step in until the claim was closed however, we helped to get them the 100 percent payment.

Let’s not fool ourselves: The direct servicing on the part of the carriers has cost the insureds millions of dollars – just look at workers’ compensation audits in which there are pages of adjustments that should be made to reportable payroll that the insured knew nothing about when providing the information over the phone or online.

Aren’t we proud of the great user experience? Should we be surprised that the carriers want this direct relationship with the insured? As much as I love this industry, let us remember that this profit-making operation that is not run by the pope or Santa Claus. Clearly there are a vast number of lawyers that thrive off of the struggles that people have with insurance companies. Having the advice and counsel of a trained, seasoned insurance professional that has likely been through their issue before can be very important.

Professional liability coverage for insurance agents is costly because mistakes happen and people rely on our advice and understanding of complex coverage. Even insurance professionals get it wrong sometimes and the loss suffered by their client comes back through an action against the agent. When a non-professional policyholder purchases a policy online from a service offering quotes from 40 different carriers, is it possible they might make a mistake?

Of course it is, and when they are clearly advised to read the policy, we expect that their uninsured claim may cause a financial loss that is catastrophic. And the insurance industry is selling this as wonderful user experience to the point that carriers are now funding insurtech startups.

After all, we don’t want a quarter-inch drill bit, we want a quarter inch hole. The insurance industry mantra is that people don’t care about proper coverage or professional help with these carefully worded contracts, they want to be able to buy the product on their phone with a credit card while watching a re-run of the Fresh Prince of Bel-Air.

The professional agent is going extinct with the blessing of the carriers and I am afraid that the insurance industry is going to cash in on the ignorance of the policyholder. Be careful what you hope for.

About Tom Quirk

Quirk is co-owner of the Garland-Sturges & Quirk commercial insurance brokerage with offices in San Jose and Rocklin, Calif.

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