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Insurance firm to replace human workers with AI system

Fukoku Mutual Life Insurance Co. is planning to slash nearly 30 percent of its payment assessment department's human staff after it introduces an artificial intelligence (AI) system in January 2017 to improve operating efficiency.

While concrete examples of AI systems making human workers redundant are currently rare, observers have pointed out that such cases are likely to increase.

The insurance firm will introduce an AI system based on IBM Japan Ltd.'s Watson, which according to IBM is a "cognitive technology that can think like a human," and "can analyze and interpret all of your data, including unstructured text, images, audio and video." The Watson-based system will be tasked with reading medical certificates written by doctors and other documents to collect information necessary for making payouts, such as medical histories, length of hospital stays, and surgical procedure names.

In addition to determining payment amounts, the system will also be able to check customers' cases against their insurance contracts to find any special coverage clauses -- a measure expected to prevent payment oversights. The type of payments the AI is expected to oversee at Fukoku Mutual totaled some 132,000 cases in fiscal 2015.

The company's payment assessment-related department had 131 employees as of March 2015. Final payout decisions will continue to be dealt with by a dedicated staff, but the introduction of the AI system will make reading medical certificates and other procedures more efficient.

Fukoku Mutual has already begun staff reductions in preparation for the system's installation. In total, 34 people are expected to be made redundant by the end of March 2017, primarily from a pool of 47 workers on about five-year contracts. The company is planning to let a number of the contracts run out their term and will not renew them or seek replacements.

The insurance firm will spend about 200 million yen to install the AI system, and maintenance is expected to cost about 15 million yen annually. Meanwhile, it's expected that Fukoku Mutual will save about 140 million yen per year by cutting the 34 staff.

Dai-ichi Life Insurance Co. is already using a Watson system to process payment assessments, but alongside human checks, and it appears there have been no major staff cuts or reshuffling at the firm due to the AI's introduction. Japan Post Insurance Co. is also looking to install a Watson AI for the same duties, and is set to start a trial run in March 2017.

Meanwhile, Nippon Life Insurance Co. began this month to use an AI system to analyze the best coverage plans for individual customers, based on the some 40 million insurance contracts held by its various salespeople. The system's results are then used as a reference by the sales offices.

While AI systems are expected to find applications in developing new products and insurance underwriting, there are worries the technology could put pressure on the employment market, as the machines trigger staff reshuffling or reductions. The future of AI may be bright in the business community, but it also has a shadowy side.

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