Three Things to Know About “AI Insurance”
AI Insurance Is Cheaper
One of the selling points for AI insurance is that it’s cheaper than legacy insurance. It’s unlike Tesla that is more expensive than gas cars. Given AI’s relative novelty you probably think the price would be higher but you would be wrong.
Take Way.com and Jerry, the two popular AI driven auto insurance platforms, for an example. Jerry claims to save an average of $800 per year on car insurance with a new policy, while Way.com says to save an average $971 a year.
Charging lower premiums is “bad news” for insurance agents like me, as our commission is a part of the premium. When insurer charge lower premium, our commission is lower as well. But I like it because AI allows agents to bring the best insurance product to the insured.
AI Insurance Brings Top Players Upfront
One probably thinks that AI insurance is crowded with a bunch of startups in the insurance world, just like in other newly emerged fields.
Not true! Across all lines of business (Life, Health, Property & Casualty and Commercial) AI platforms are full of top players, hardly any small potatoes.
One reason is that some AI platforms, Apps or Tools are developed by big legacy players in the first place.
For example, Esurance, which is rated by Investopedia as the best Multiline app, was founded by Allstate, one of the auto insurance carriers.
Haven Life, one of the best rated life insurance websites by Investopedia, is backed by MassMutual, a trusted name in the traditional insurance world with an A++ (Superior) rating by AM Best.
So this makes sense: AI apps need the big names to increase its credibility, while the big names need AI apps or platforms to expand their reach to consumers.
AI Insurance Won’t Replace Legacy Insurance Like ChatGPT Replaced Google
When ChatGPT came out, many people stopped using Google for search. This won’t be the case with insurance. For one thing, AI insurance products (comparison shopping sites, platforms, apps) still have bugs or flaws.
Buying insurance is still more complicated than using large language models. One fundamental difference is that Americans have a high level of financial illiteracy, while everyone speaks English very well.
Market Research Future tells us that “global AI in insurance market was valued at USD 3.1 billion in 2021 and is projected to grow to USD 40.1 billion by 2030.” I suspect if this leans toward overestimation.
Consider Auto Insurance again. Jerry claims to have 3 million policyholders today. Since it started in 2019, 3 million in 4 years are not shockingly fast, considering that there will be 243.4 million licensed drivers, Jerry has only slightly more than 1.23%.
That said, I still wish AI insurance flies high like this beautiful bird:
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