Week 6 Case Study 12.1 - Allstate, How does Allstate use artificial

Week 6 Case Study

Read “Case 12.1: Allstate” and write an essay that answers the following questions:

1. How does Allstate use artificial intelligence and big data in its operations?

2. What was the goal of Allstate when it collected 11,000 terabytes of data from 1.2 million people every day?

3. Why did Allstate turn to the Colossus program and what were the issues they faced with it?

4. How did Allstate's creation of Arity help them to gather more data and make more accurate claims?

5. How did machine learning help Allstate turn the company around after a major employee turnover?

6. How does Allstate use the data they collect to improve customer satisfaction and business outcomes?

7. What competitive advantages does Allstate gain from focusing on market segmentation and identifying fraudulent claims with AI and Insurtech? 

Requirements:

· There is no specific page requirement for your analysis. Instead, your work will be evaluated based on how thoroughly it addresses each of the questions that have been outlined for you.

· You must utilize proper APA formatting and citations throughout your paper. If you use any supporting evidence from external sources, it is imperative that you provide accurate citations for each reference.

· You must include a minimum of two sources from scholarly articles or business periodicals, aside from the course textbook. 

· Include your best critical thinking and analysis to arrive at your justification.    

Case 12.1: Allstate

One insurance company that uses artificial intelligence to its advantage is Allstate. According to Forbes, analytics and algorithms, dealing with large amounts of voice data and free-form text, are very well integrated into Allstate claims handling, bill- ing inquiries, technical helpdesk, and agent interactions (Bean, 2018). Allstate col- lects about 11,000 terabytes of data from 1.2 million people every day, with the goal of providing personalized experiences to each, according to a report in Insurance Business. “Allstate is not an insurance company, we are a data company - a customer- centric data company” (McKendrick, 2019).

Allstate originally used a tool for digital estimation: Colossus. The Colossus program was first licensed and popularized by Allstate in the 1990s. Allstate turned to Colossus because they wanted to standardize their claims. Allstate also turned to this program because it was billed as a means to save money on payouts. Allstate was using Colossus to estimate the value of claims through the use of AI. In 2010, Allstate was fined $10 M for the Colossus’ computer claim handling process. It was said that the claims made by the program were insufficient and the program was not large enough to properly cover all of the content provided by Allstate accurately. That year Allstate began renovating the Colossus program and formed some small analytics subsidiaries such as Arity to gather more data to create an even better sys- tem than Colossus, which could make more accurate claims. In 2010, Allstate cre- ated Arity. The goal was to build a team and technology to create and gather driving data to price insurance more accurately. Arity put telematics devices in cars while giving users insurance discounts for sharing data. Arity claims that this method of tracking user driving patterns is the most predictive way to most accurately assess the risk of a driver. This component proves that if someone has specific behaviors, those behaviors are going to lead to losses.

Allstate used machine learning to turn the company around after a major employee turnover within the company. Allstate focuses on customer relations; they use collected data to gain valuable insight into their customers, which helps keep customers satisfied, improving business outcomes. In its most recent quarter, the company reported a revenue of $8.94 billion, which increased by 6% from a year earlier. Hadoop and AI provide them with new competitive advantages. Instead of focusing on traditional small sample data, they focus more on market segmentation, accurately understanding the target customers, instead of randomly picking custom- ers. In addition, Insurtech gives them good sales strategies, such as identifying fraudulent claims and developing better marketing and sales activities. Therefore, they can make better decisions. Allstate’s use of artificial intelligence and big data has been driving the success of the company and will continue to do so, as long as Allstate keeps developing its AI alongside its competitors.