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Contribution Details

Type Master's Thesis
Scope Discipline-based scholarship
Title The Impact of Artifcial Intelligence on Insurance Industry and Real - Time Dynamic Analysis
Organization Unit
Authors
  • Alessandra Falkowski
Supervisors
  • Pablo Koch Medina
  • Mario Sikic
Language
  • English
Institution University of Zurich
Faculty Faculty of Business, Economics and Informatics
Number of Pages 53
Date 2019
Abstract Text Arti cial intelligence is a tool that is becoming so useful and ubiquitous that it has been described as a kind of sixth sense. It is present in our everyday lives in ways that we do not always realize, making us not perceive the speed with which it a ects us. Technological instruments, able to handle huge amounts of data and to simulate human behaviours, are expected to be di used in the near future a ecting all industries' business models signi cantly; this is what gives companies a clear advantage in amplifying its products and services. For many years we have been hearing about technologies that have entered the banking sector by making us familiar with the term ntech; a similar pattern is also being seen in the insurance industry. As new technologies are introduced into the insurance industry, people will have to reimagine it and the way in which the insurance system will work in the future, but the speed with which the market is developing and the complexity of changes that arti cial intelligence will bring is not completely understood. This Thesis provides a better comprehension of what currently exists and is thought to get an insight into how the insurance market is being a ected by AI giving a deeper insight on real-time analysis and how the system we are used to will be transformed. The key ndings presented in this Thesis are that the insurance sector is being a ected by technology since it is a data-based sector and vulnerable to changes. Insurance companies have to digitizing existing business models through real-time processes to maintain a competitive edge. The revolution in business activities could be bene cial to the market development; new innovations allow for an increased individualized risk pricing that will make fairer premiums and more re ective of that risk, leading to an improvement of customer experience. Although customers will be charged with their actual risk level, avoiding assessments based on group characteristics, risk pooling will still be relevant in the insurance sector: if the risk is too high, an insured would not be able to a ord the insurance if it were not for risk pooling, he would be fully responsible for any loss, so the principle of paying claims with the premiums of the entire pool will not change. Insurance technologies has not to be seen as a problem but as an opportunity as it allows to keep up with constant changes, reduces information asymmetries and enable insurers to take a proactive role in reducing risks rather than compensating costs after the occurrence of a loss event. This proactive approach increases the social capital of the insurance providers, mitigates preventable claims and customers' frauds and allows for cross-selling of multiple services building an insurance ecosystem of di erent companies. However, it should be noted that AI not only brings bene ts but also raises some concerns. The impact of arti cial intelligence is twofold: on one hand, it impacts the employment levels and introduces new risks into the market, on the other hand, it helps the insurance processes and o ers the possibility to develop potential new insurance products. This study is presented in six chapters. The rst chapter is an introductory part that contains an overview of the disruptions the insurance industry is facing. The second chapter provides a background on the insurance system and the principles on which it has been based so far. The third chapter explains how arti cial intelligence will in uence the insurance industry and how it should respond to changes. The fourth chapter is devoted to dynamic insurance based on real-time analysis, with a focus on risk assessment and underwriting and claim management processes. The fth chapter deals with two important limitations that AI brings and the related opportunities. The last and sixth chapter includes the conclusion of the study. This Thesis is supported by gures, tables and examples whenever necessary to assist the reader in developing a clear understanding of the topic.
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