Written by Marsh Commercial
Introduction for newsletter
Whether we’re for or against Artificial Intelligence (AI), it’s here to stay.
No sector is immune to AI’s widespread reach. From the healthcare sector, which uses it to save lives, to the car industry, who rely on it to achieve high levels of precision, AI is already proving a game changer.
Reports show that AI is expected to grow to over $1 trillion (USD) by 2035, making it clear that the technology will only become more embedded in our everyday lives.
It’s not difficult to see how AI can improve processes within many organisations, simplifying them and shortening resolution time frames.
In this article, Peter Stoll, Recruitment Insurance Director at Marsh Commercial, explores the pros and cons of AI—and whether it can ultimately help or hinder those who choose to embrace it.
Written by Peter Stoll, Recruitment Insurance Director, Marsh Commercial
Like it or loathe it, the integration of AI into the insurance sector will only increase in future years—and it’s in our best interests to prepare for it.
Most of us have been using AI for some time, whether through chatbots, facial recognition on phones, Google Search, or even when sending an email.
With the UK AI market predicted to grow to over $1 trillion (USD) by 2035, it’s clear that this technology is here to stay—and will likely have an unimaginable impact on our personal and professional lives.
The risks of AI integration
There are undoubtedly many benefits to AI, with increased productivity, enhanced streamlining, reduced costs and improved customer engagement just some of them.
However, there’s no denying that it brings with it numerous risks.
For employees, job displacement is perhaps the most prominent area of concern—and perhaps with good reason. A study by Goldman Sachs revealed that AI could replace the equivalent of 300 million full-time roles.
Cybersecurity is also potentially vulnerable. A report by the National Cyber Security Centre found that AI would offer an ‘improved capability’ for cybercriminals. However, using AI to improve cybersecurity, it reported, could offset that threat.
In addition, unanswered questions remain about AI decision-making and who is ultimately held accountable.
Recruitment faces its own AI-related problems, with algorithmic biases and discrimination being genuine issues.
A recent study showed that job applicants believe AI-driven recruitment to be less fair than that carried out entirely by humans.
Unions have also voiced their concerns over using AI to make decisions about job appointments, pointing out that UK employment legislation is not keeping up with AI.
The many vulnerabilities of AI can also affect businesses. Shares in Google’s parent company, Alphabet, fell by more than 7% in February 2023 after an advert to promote its new AI bot, Bard, showed it providing an incorrect answer.
Mitigating risks in AI adoption: Ensuring data security and privacy
Legislation is needed to exploit and protect against ever-evolving AI competencies, and governments worldwide are attempting to create it.
The European Parliament has recently produced The AI Act in an attempt to limit the risks. Meanwhile, the UK and the USA have now signed the first bilateral agreement of its kind to enable them to work together to evaluate the safety of AI tools and their underlying systems.
However, with cyber risk an ever-present and evolving issue for companies of all sizes, organisations themselves must take action to limit the potential damage of an attack.
Cybercrime has the power to destroy companies, with many consequences, including reputational damage, huge financial losses, and, where data has been breached, legal issues.
Such are the advanced capabilities of cybercriminals, that regardless of how much is spent on IT security, no business is fully resistant to the effects of an attack.
Insurance policies such as cybersecurity and data liability insurance can go a long way in protecting against losses that can result from a wide range of cyberattacks. For businesses that use AI when offering advice, professional indemnity can protect against the risks associated with poor advice that leads to losses or damages.
Companies without these policies in place should consult insurers to carry out a full risk assessment.
Future outlook
A report by the Department for Education on the impact of AI on UK jobs and training recently revealed that the finance and insurance sector was more exposed than any other.
Traditional claims processing practices rely on the manual inputting of swathes of data—a job that is both time-consuming and subject to human error. Processing times are slow, and the risk of loss or theft of the physical documents is ever-present.
AI’s data-driven formulas, on the other hand, should mean reduced errors and improved accuracy, ultimately reducing insurer costs and increasing payout timeframes.
In addition, AI could react more quickly when it comes to detecting insurance fraud. Plus, the speed at which it can analyse swathes of data also means that it can offer valuable insights that help support underwriting decisions.
Rather than replacing human interaction, offerings such as chatbots are already enhancing it so that clients can access assistance 24/7, while anticipated advancements could make way for other exciting new solutions.
Swiss Re, for example, has developed parametric Flight Delay Compensation built on an AI model that predicts flight delays. If a delay occurs, the insured customer won’t have to file a claim. Instead, they’ll receive an instant payout, all thanks to AI.
Partnerships with digital companies will also result in improved risk assessments, and automated underwriting and accelerated claims processing are expected to become normal parts of future practices.
However, none of this works without human intervention. Humans will ultimately act as judge and jury, bring disgruntled customers back into the fold, and ensure that the insurance sector remains fit for purpose in 2024 and beyond.
If you would like to discuss your insurance arrangements please contact Peter Stoll via peter.stoll@marshcommercial.co.uk or call 07771 691115.
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