In the ever-evolving insurance landscape, artificial intelligence has emerged as a powerful tool to enhance efficiency, accuracy and customer experience. The impact of AI is profound: its global market size in the insurance industry currently is estimated at $4.59 billion and it is expected to be worth around $79.86 billion by 2032—growing at a compound annual growth rate of 33.06%.
With great technological advancements come unique challenges, as insurance agents now face the task of effectively managing and mitigating the risks associated with the adoption of AI. However, cautious consideration and implementation of technology-driven tools can benefit and enhance business operations greatly. Let’s explore the benefits of AI adoption, as well as the top ways insurance professionals can manage AI risks.
Unlocking the potential of AI in insurance
The benefits of AI adoption are vast and transformative for a variety of insurance functions. AI has the capacity to customize insurance policies based on policyholders’ unique needs. For example, AI-driven auto policies can monitor driving behavior to determine policy discounts, while smart devices and the Internet of Things contribute to risk mitigation for property insurance. AI also can enhance efficiency in claims processing, reducing settlement times from weeks to mere hours. AI holds the potential to enhance the overall experience for policyholders, simultaneously decreasing operational overhead for insurance agents.
Managing AI risks across operations
Successfully handling AI risks in the insurance industry requires a proactive approach that combines technical understanding, ethical considerations and regulatory compliance. Here are the top ways the insurance industry can manage and mitigate these risks:
No. 1: Understanding AI algorithms. Familiarity with the AI models employed in underwriting, claims processing, and customer service enables agents to identify potential biases, errors or ethical concerns. Continuous education on AI developments is crucial for staying ahead in this dynamic landscape.
No 2: Data quality assurance. AI heavily relies on data, and insurance professionals must prioritize data quality assurance. Ensuring that the data input into AI systems is accurate, up-to-date, and unbiased is essential for preventing algorithmic errors. Regular audits and validation checks help maintain the integrity of the data used in decision-making processes.
No. 3: Ethical considerations and transparency. It’s crucial to communicate clearly with clients about the use of AI in their operations, including how decisions are made, and the measures in place to ensure fairness. Establishing ethical guidelines for the use of AI reinforces trust with customers and prevents potential regulatory issues.
No. 4: Cyber security protocols. It’s important to prioritize robust cyber security protocols to safeguard AI systems from potential threats. Regular security assessments, encryption measures and employee training on cyber security best practices are essential components of a comprehensive risk management strategy.
No. 5: Regulatory compliance. Take steps to stay informed about the legal landscape surrounding AI, ensuring compliance with data protection laws and industry-specific regulations. Collaborating with legal experts can help navigate the complexities of regulatory frameworks, minimizing the risk of legal repercussions.
No. 6: Human oversight and collaboration. While AI can automate many processes, human oversight remains crucial. There always should be a balance between AI-driven decision-making and human judgment. Collaborating with AI systems enhances efficiency, but human intervention is necessary to address complex cases, exceptions and ethical dilemmas.
No. 7: Continuous monitoring and adaptation. Implement continuous monitoring mechanisms to detect any anomalies, biases or deviations from expected outcomes. Regular updates and improvements to AI algorithms ensure their relevance in an ever-changing environment.
Insurance agents who embrace AI while prioritizing transparency, data quality, ethicality, human oversight and continuous monitoring will be set up for success to embrace its full potential while navigating its potential risks.
The careful research, development, and vetting of AI-powered technologies are essential to ensure the safety and security of agents, insurance carriers and the policyholders they serve. With careful planning and the right safeguards in place, AI can become a valuable asset—enhancing insurance operations for enhanced customer experience in a competitive market.
Jen Dalton is the chief information security officer at Brush Claims. With more than 20 years of experience working in the software development and information technology industries, Jen has held multiple roles throughout the software development life cycle, in design and in management. She has a passion for security, data and systems, and how they all work together. In her current position, Jen recognizes the importance of security to better serve Brush Claims’ clients and continues to grow her expertise through certifications and additional education opportunities. In her spare time, Jen typically is reading, painting, kayaking with her two kids, or playing with her Saint Bernard.