As the world increasingly embraces automation, it forces underwriters to adapt to a new risk environment. However, insurers themselves are leveraging the capabilities of artificial intelligence (AI) to remain competitive, improve processes, and increase efficiency, according to two new reports from Lloyd’s.
The first report is titled ‘Taking control: artificial intelligence and insurance’, and was published in cooperation with the University of Surrey. It analyses the associated risks of AI implementation as well as the potential for AI to help insurers improve their operations.
The report identified four risk areas for AI: trust and transparency, ethics, security, and safety. As AI becomes more complex, the impact of cyber breaches will likely increase. Meanwhile, ambiguity and legal uncertainty is contributing to unanswered questions around who is ultimately liable when something does go wrong.
On the other hand, AI also provides business opportunities for insurers, as any company offering algorithm-based systems to data-rich companies might seek to insure against the risk of the algorithms returning incorrect decisions. Moreover, companies are developing new uses for AI, such as disinformation defence, which uses technology to filter out fake news; detect and eliminate troll-bots; and certify information and authenticity of images and videos. Finally, insurers could explore what type of products could be useful to these new businesses and in what form.
According to the report, along with being aware of the risks associated with using this fast-developing technology, insurers should look to exploit the potential benefits that AI and robotics can offer in terms of improving their current processes and delivering better value.
The second report, ‘Taking control: robots and risk’, investigates the impact collaborative robots or “cobots” have on the economy, and the subsequent risks implications for the insurance industry.
More advanced robots are likely to take over millions of jobs in the future, according to many predictions. This has significant implications to the risk landscape in many aspects of the economy. However, there is an opportunity for insurers to collaborate with clients as data from cobots will provide a much greater understanding of risk and offers opportunities for improved risks and pricing models. The report finds that adoption could be sped up by insurance as it could help to address health and safety concerns.
“Insurers have an opportunity to play a role in shaping the development of the AI and robotics and will no doubt be instrumental in providing solutions to some of the most complex risks associated with these technologies,” said Dr Trevor Maynard, head of innovation for Lloyd's. “Some of these risks have been well documented, however for insurers to respond appropriately, it is important that the benefits and opportunities of AI and robotics are properly understood. The publication of these two reports today aims to provide underwriters with guidance on best practice as well as insights into the short, medium and long-term potential of AI and robotics.”