Thanks to AI, Industry Could Soon See Big Rise in Parametric Insurance. Are Agents Ready?

Insurance agents must now embrace the use of artificial intelligence, but they won’t be replaced by it. And the use of parametric policies will soon increase sharply across property insurance lines because that coverage lends itself perfectly to data-driven AI programs.

Those were some of the major points outlined by Thomas Wetzel, an AI and cybersecurity consultant and educator for the insurance industry. He spoke to a packed meeting room at the Florida Association of Insurance Agents’ annual convention in Orlando in June.

“Insurance companies are going to become more comfortable insuring more types of things than they ever have,” said Wetzel, who previously worked for the Insurance Information Institute and now leads Thomas H. Wetzel and Associates.

Parametric insurance, which pays a set amount when certain parameters, such as windspeed or flood levels, are reached, will soon be one of the fastest-growing areas that carriers embrace, thanks to the vast reach of artificial intelligence.

AI can quickly analyze so much more data to accurately determine risk on a property or business, he said. Insureds will come to like parametric because payouts can be much faster, which can allow property owners to make repairs sooner and prevent further damage.

“The average car claim takes about six minutes. AI can do it in six seconds,” Wetzel said. “So, we’re going to be seeing a lot more parametric insurance and it’s all because of AI.”

But human agents need not fear that they will be supplanted by “thinking” software, he noted. Clients will always want the human touch, a face-to-face meeting or a personal phone call from their agent.

For the most part, “there’s a zero percent chance of you losing your job because of AI,” he noted. “But it will change how you do your job.”

Here are some tips:

• Use AI as a virtual assistant. Use the software to draft emails, schedule meetings, summarize reports, or to research clients, risks and available coverage.
• Be transparent with policyholders on how it is being used.
• One area AI is not good at is binding, said Logan Edmonds, CEO of Tabernacle Tech, a cyber risk consultant who also was at the FAIA session.