If you wonder who will provide you with your next insight on a Schwab investment or how they calculate your insurance premium, it may not be who you think but instead what you think… Artificial Intelligence (AI), says Joseph Zulick, writer and manager at MRO Electric and Supply.
At a recent IoT in manufacturing conference the audience wasn’t filled as much by manufacturers but by insurance advisors. Their interest was in how AI could be used to monitor good and bad behaviour. They wanted to know how the internet of things (IoT) and AI could provide information and trending info to provide discounts to companies with high performance leadership and responsive systems.Violators would pay higher rates if they didn’t utilise the improved systems and didn’t display improved trends.
In the investing area we are seeing developments that are available for investors to use the AI systems which can analyse seemingly irrelevant data to relate the info to your investment. Let’s take an investment like orange juice futures in commodities. You can tie data points to your investments to automate buying or selling or percentage of investment.
For instance, if you feel a key performance indicator (KPI) is temperature and rainfall you would tie these data points to monitor them and require that they both trend or remain at a normal level, between 40-80 degrees and 10” of rainfall / per month. The AI would monitor this data and either alert you, sell, or reduce you investment percentage in the investment. This data is fairly limitless based on available data from existing reporting info.
Let’s say in a more complicated situation like motor vehicle sales you can trend or invest in AI which can monitor key trending in social media. AI can determine positive and negative language in social media and determine trending for a car company.
This same info may impact insurance rates if you tie in safety KPI along with negative language trends. Often in the market, perception is reality. Insurance and investing are so tightly intertwined and it’s progressing that way sooner than later. Insurance and investing are using risk analysis to determine trends, and from AI and IoT they are now using tools to determine risk and reward.
In other words when it comes to insurance you will have lower premiums based on proven safety and performance not based on fines, tickets and accidents. If you are truly high performing you will be rewarded for your risk aversion on the insurance side of the business.
On the investing side risk has always yielded the greatest rewards. However, it’s in your best interest to mitigate those risks with information. AI is developing the best view from the most angles. If you think of the past as looking at a car before you buy it from a 2d picture, today with AI and IoT, it’s like having a 3D crystal ball! How does this help us? Information is king in investing and insurance, therefore any additional details can only benefit to improve the odds of the outcome. Why is card counting frowned upon in Vegas… it gives you more information and that information improves your odds and your outcome!
If we treat other investments as we do gambling, what information could help us? Let’s consider the information we can gather now from AI through existing channels. Let’s pick something like appliances.
First, do the company’s appliances meet or exceed the utilitarian needs? Meaning does it do the basic functions? Is it designed properly to fit in normal kitchens? Does the oven cook at 600 degrees or will it only heat to 100 degrees? These are all objective points that are available and can easily be analysed. Next we look at trending design preferences, colors, finish, etc. these can match against industry trending reports.
Next, does the appliance meet the next level of safety and IoT? Does it have a connected screen? Will it alert your phone if the pot boils over? Will it shut off? These are features and benefits that the new Iot can not only provide but monitor and provide feedback to the industry.
Let’s say that it reports that an average household has a pot boil over 3 times per year and no one is there to turn it off in 50% of these cases. This is a huge case for promoting the safety of the product. This is data acquired from actual field studies and indisputable.
Now take this information you had before when investing in an appliance company and add in the new trending field evidence, you now can make a smarter decision in your investing and insurance companies will look at discounts for smart appliances.
If we look back at the poker analysis, the analytical objective information are the cards we see and the data feedback from the field is like the camera on your hole cards, or, if you prefer, it’s like when they show the audience the answer on the game show or the hint that the actual contestants don’t get to see!
Information is and will continue to be a phenomenal persuader in investing. The systems being developed for investors will provide value added for investors who pay for premium service.
You can choose if you want to turn these influencers on or off in the same way as Boolean logic does. A and B must be true for me to increase my investment. IoT and AI will impact more than we will realise in our insurance claims and in our 401k. The future of our portfolio will be outlined in AI.
The author is Joseph Zulick is a manager at MRO Electric and Supply.
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