Machine learning has taken the world by storm. Even in its nascent stages, artificial intelligence poses a potential disruption to virtually every industry.
The insurance space is particularly interesting because it combines both human and technical elements in order to provide its customers with suitable, personalized products.
In order to understand the opportunity, it’s important to know how machine learning and artificial intelligence could substantially disrupt the traditional insurance world.
Machine learning, the current application of AI based on machines learning from data presented to them, is capable of analyzing information at a much more effective and efficient rate than current systems. Artificial intelligence, however, takes this to the next level and postulates the idea that machines will be able to act on these patterns without further instruction from humans.
So what does this mean for traditional insurance industry? Should Allstate, Metlife and Prudential be scared? The insurance world as is, is largely based on data, and the insurance products that companies are able to offer people are largely based on a variety of risk factors in order to calculate premiums, or underwriting. While these rates are fairly close within a certain range, traditional insurance systems are not using the vast amount of years of data to their full potential. Startups, like the ones mentioned in our list, are discovering opportunities where the traditional players aren’t.
This misunderstanding of data could cost either insurance companies or people billions of dollars. Machine learning and artificial intelligence, won’t only use this data to come up with better rates, but they can carry out much more complex and accurate predictions. For the insurance industry, predictions are everything. Here are 5 startups with a treasure trove of funding, poised to make a significant debt in this long antiquated industry.
GenLife is one of the first companies that seeks to combine a basket of disruptive technologies into a new insurance platform. By using blockchain (a distributed ledger technology that significantly reduces the risk of fraud), artificial intelligence, and the cloud, GenLife will be able to provide high quality insurance and a seamless customer experience at a much lower cost than traditional insurance providers.
Lemonade was founded in 2015 and has already raised over $60 million in capital from Sequoia Capital, Google, and Allianz. Lemonade offers insurance to homeowners and renters solely through smartphones. According to their site, it only takes 90 seconds to get insured with Lemonade and 3 minutes to get your claim paid. Perhaps the most attractive aspect for potential customers? Lemonade’s subscriptions are only $5 monthly for renters and $25 monthly for homeowners.
Lemonade has effectively shown how to use machine learning algorithms and big data to combat fraud and reduce costs for its customers.
Captricity was founded in 2011, and has raised over $52 million. The Oakland-based startup has developed machine learning algorithms that are capable of transforming and extracting data from handwritten and typed forms at a +99.9% accuracy rate. This essentially speeds up the quote-to-bind process and can drop staffing costs by 50%, which is largely why over half of the top U.S. insurers use Captricity.
Founded in 2013, Zendrive has raised over $20 million to build a technology that uses sensors already present in smartphones to measure and improve driving behavior. By using these sensors, Zendrive is able to significantly reduce (or at least accurately calculate) the probability of collision. Zendrive conducted a 3-month analysis of 3-million anonymous drivers and found that drivers used their phones during 88 out of 100 trips, for the totality of the 570-million trips and 5.6 billion miles.The San Francisco based company incentivizes users by offering them up to a 25% discount on their insurance.
Shift Technology was founded in 2013, and has raised over $11.8 million in funding to build an Ai-powered cybersecurity solution to find and detect fraud in the insurance industry. The current system has processed over 78 million insurance claims and currently has a 75% accuracy rate that is expected to improve in time, as AI technology becomes more accurate.
Relativity6, founded in 2016, has disrupted Artificial Intelligence across several industries with a patent on Behavioral Listening Technology. Traditional Insurers have been flocking to their technology which shows promise in converting policyholders into actual lifetime customers by analyzing client churn. Where most startups are focusing on risk analysis or improving underwriting, Relativity6 has chosen a more customer-based approach, a revolutionary strategy in an industry desperate for disruption.
These are some of the hottest AI and machine learning startups that have raised significant capital, but are yet to be acquired by any of the major players like Apple, Microsoft or Google. A few traditional insurers like MetLife, AllState and Nationwide would be wise to seek acquisition before they lose too much ground to startups.
For a few other startups disrupting antiquated industries, like Maana and Relativity6, read here.