“A game changer for insurance companies.”
That is how Kathleen Birrane, US insurance regulatory practice leader at DLA Piper, described AI technology in an interview with Insurance Business.
Her comments come in the wake of growing AI adoption within the insurance sector.
According to TechRadar, “a third of major insurers already have Gen AI use cases in production, while most are advancing their data capabilities.”
Danny Tobey, global chair of DLA Piper Americas AI and Data Analytics Practice, argues that AI can help insurance companies comply with regulatory guidelines and minimise risk when writing policies.
He noted that “our goal with proactive compliance is to look at the much earlier set of communications and other unstructured data, where some of these bad ideas get started, and that allows us to find things much earlier and do corrective actions like education or improvements to policies...”
A report by KPMG highlights AI’s potential to mitigate risk: “With enough training data, these algorithms can better analyse risk and predict outcomes, adding accuracy to risk models and pricing structures. These solutions are often developed to solve a specific problem, but there is an opportunity to quickly adjust for wider use across the value chain.”
AI not only has the potential to help with regulatory compliance and risk mitigation but to also boost the economy and improve the insurance landscape as a whole.
“Research from McKinsey reveals that Generative AI alone is projected to contribute up to $4.4 trillion to the global economy annually, with insurers expecting gains in productivity, premium growth and underwriting accuracy,” TechRadar reported.
Birrane argued that generative AI technology, while assisting insurance companies with compliance and risk management when writing policies, could also help brokers with client compliance and risk mitigation: "Brokers are guiding businesses in how to manage risk in a way that helps with their underwriting, you know, that side of their risk profile," said Birrane.
She also noted that for brokers, generative AI tech can identify potential risks and inform clients about actions they can take to mitigate these risks: “This is an important tool in a broker's box in order to make their clients aware of things that they can do to mitigate AI and other risks,” she said.
Birrane noted that not only can brokers use AI to support their clients, but clients can be advised to use AI to make themselves more appealing to insurance companies.
She said, “People who are businesses that buy insurance need to be thinking about their AI hygiene as well… in any sector, proactive compliance has a role to play in risk mitigation. But for people who want to, for businesses that are buying insurance, this helps with their underwriting, right? So if I'm a business and I utilise AI as a risk control mechanism, then I'm a better risk for an insurance company.”
According to Tobey, AI adoption is something that companies should really consider:
“The whole goal is the early detection of risk and prevention of very expensive harms, and that's what this technology is so good at. And you can do it in a way that is responsible, and has good strong controls around it. But you can't bury your head in the sand.”
KPMG echoes these sentiments, suggesting that it should be well-coordinated and thoroughly thought out each step of the way: “Chief technology and chief finance officers, along with senior leadership teams (including chief data officers and chief transformation officers), will need to quickly identify and develop their AI strategy, carefully navigating the balance between embracing innovation, understanding their barriers to adoption, and mitigating the emerging risks,” it wrote.
While AI implementation requires caution, it clearly offers tremendous potential within the insurance industry and it is time for insurance professionals to embrace its capabilities.
