Investing in AI?

Published on Aug 13, 2018

Here at TonkaBI, we understand that companies must keep up with technology, to stay competitive. In the insurance industry, however seems to be very reluctant to change, especially with regards to technology.

This has both negative and positive aspects. It’s a negative situation because the insurance industry is and are going to be lagging behind the rest of the business world, especially when it comes to innovation and as a result productivity will be lagging. Its a positive aspect and opportunity for the insurance industry because just about all the companies in the insurance industry, seem to follow suit.

Therefore, if your organization is willing to start investing in innovative technologies, and be open to change, your organizations productivity will increase exponentially and, as a result, will start to dominate the industry over the companies that have decided not to invest in the right technology.

The adoption of AI is a path that started with the commencement of digital technologies. It is the latest stage of investment beyond 'keeping the lights on' and advanced digital technologies.

A recent study by McKinsey has shown that there is a relationship between a company’s digital capabilities and its ability to deploy the new tools.

The study modelled the extent to which underlying clusters of core digital technologies (cloud computing, mobile, and the web) and of more advanced technologies (big data and advanced analytics) affected the likelihood that a company would adopt AI.

Companies with a strong base in core digital tech were more likely to adopt AI tools. Why is this? I believe that it has to do with their use of data and their ability to understand that their companies are driven by data. Companies that adopt AI or are looking to move on to AI have already adopted data driven strategies and have knowledge gained from applying and mastering these existing digital capabilities to do so.

AI will drive profits. This chart shows the relationship between willingness to invest in tech and potential future profit differential over competition.

Here at TonkaBI we’re looking to partner with these companies, the ones who are willing to experiment and learn with us. I know that after a while, most organizations will see where the true value lies with TonkaBI and our Artificial Intelligence (AI) and Machine Learning Applications. We believe in building AI augmentation - adding AI tools to your staff, allowing people to train and grow with the business, using AI to deal with repetitive issues.

AI is not about replacing staff with machines. It is to do with driving efficiency, change and process improvement. Companies have to deal with staff training, onboarding and attrition in call centres and process centres, all these rates vary but can be quite high.

Let's look at a 'case study'

Assume that you have 100 staff members in a claims management call centre, with a fully costed person at $3,000 per month and with claims to produce a costs of $18 per claim.

You are also dealing with around 20% staff attrition rate. Plus the management have put a growth target on of around 15% per year in the number of claims for the team to manage.

Option 1 - No AI - be brave, carry on....

Costs maintain at $18 per claims - after 3 years with growth in business staff have grown to 121 staff and costs are now $4,356,000 per year going in to year 4.

In this period, you have also has to replace and train around 40 people as well as grow the team to 121 people, this year you are expecting to hire around 25 staff to maintain a steady team.

This is a lot of work and still the business expects to grow and now you need to reduce costs! $18 per claim is considered too high to be competitive.

Option 2 With AI technology - invest and learn

3 year AI strategy and tech spend = $260,000, this allows you start to manage your team down (possibly all through natural losses) as the AI starts to take on more and more work. Staff wise, the first year, you lose 17, second year, you lose 15, and in the third year, you lose 8, which would leave you with 60 staff members in the call centre. These could all be considered "Call Centre Executives" - highly trained and valued.

The team of 60 people are fully augmented by AI. Costs going into year 4 - would be around $2,210,000 or $10 per claim.

The result: A potential 45% drop in costs of each claim. Increasing your Bottom Line profits by around $2 million, per year.

You are now in a position to be very competitive. Achieving that 15% growth is easy!

Your staff members are in a better position too. Over the years, staff become very knowledgeable at their jobs and allow the company to grow because of improved skills and efficiency. They are able to take on any difficult situations that were considered anomalies, the Artificial Intelligence (AI) claims processing would handle the core problems, questions that are seen time and time again, allowing your “Call Centre Executives” to work on the business and add value to the business.

The company that chose the AI route would now be in a position to offer huge savings in claims processing that ultimately leads to better insurance margins or discount opportunities to win new business.

This is a VERY conservative case study, costs for hiring and training new people and expansion into new offices are not included in Option 1. For Option 2 it is quite possible that further benefits could be uncovered in process automation allowing the company to train and retain their best staff and offer benefits in pay and award too.

AI is not a threat to all companies, it is a threat to those who do not start to look at the benefits and invest.

The number of companies applying the full range of AI technologies, is still small, but the competition is stiffening. Fast followers are responding as they see profits drained by attackers. Companies that have a strong base in digital capabilities will benefit, since they can move more quickly to adopt AI.

Remember TonkaBI is the expert in Innovative Data Technology, especially for the Insurance Industry! We understand what challenges insurance companies like yours face on a daily basis, and we’ll be with you every step of the way, working with you to make this process as effective and as efficient as possible. TonkaBI is a living breathing organism, in all aspects, and if something needs to be adjusted, reorganized or rebuilt, this is something TonkaBI knows how to do this, do it right and do it quickly.

If you get a chance take a look at our website, also our blog (which you are reading now!!). Please feel free to contact us to set up a call and/or demonstration of TonkaBI, our email address is


tags #insurance #claims #artificalintelligence #AI #machinelearning

Posted in Insurance AI Blog on Aug 13, 2018