Insurers wrestle with the speed and power of artificial intelligence

HOLLYWOOD, Fla. – In the early days of Netflix, it took the company nearly three-and-a-half years to get to one million users. It took Airbnb about two-and-a-half years.

"When ChatGPT launched it took five days to get to a million users," said Michelle Dauphinais
vice president and head of distribution, strategy & enablement for John Hancock. "So it is out there in terms of how people want to use it and interact with it to gain efficiencies."

Use of artificial intelligence by insurers isn't growing quite that fast, but it is growing. The industry doesn't really have a choice, added Mark Holweger, president and CEO of Legal & General America's insurance division.

Equating the AI evolution to "the industrial revolution on steroids," Holweger said the adoption is going to be constant. "Daily one-percent moves" that are going to catch a lot of insurers off guard, he said.

For carriers who refuse to adopt AI, "you'll find I can't compete. I can't match the service levels. I can't match the placement levels, the instant decision levels," Holweger said.

The two executives were part of a panel on AI Thursday during the 42nd NAILBA Annual Meeting.

Opportunity abounds

James Wong is area executive vice president for Partners Advantage – A Gallagher Company. AI holds promise for the industry in two areas, he said.

First, AI brings the potential to "make things better, faster and cheaper all at once," Wong said, which could delay attrition throughout the industry. Likewise, AI can remove barriers for new entrants to the marketplace.

"Never before have I seen the cost and the barrier of entry into this industry to start an agency, or a personal practice, or a BGA or an IMO be as low as it is," Wong said.

So much of what AI can do is designed to assist with the things that make starting a business easier, he added, whether it be learning or finding connections or assembling knowledgable staff.

"I don't think it's going to displace a lot," Wong said. "I think it's a compliment that makes it easier. There are some things, chatbots that exist out there, that make your lives a little bit easier. So now you can be running a more efficient agency."

The human element is still crucial to a lot of customers, the panel agreed. For example, a customer calling in a claim will need to talk to a human in many cases, Dauphinais said, and conversations about the death of a loved one can never be sent to AI.

Regulation still to come

How to properly regulate AI technology is baffling many state regulators. There are concerns about big data and what insurers can do with it.

The Colorado Division of Insurance became the first state to go ahead with its own AI rules for life insurers. The state recently passed new rules prohibiting life insurers from using data and technology in any way that could lead to unfair discrimination with respect to race, gender and protected characteristics.

The bill is "very specifically telling our industry you have to make sure you have a framework and assessment in place so that you do not make decisions against protected classes, and that you're not being discriminatory in terms of how you underwrite your risk assessment," Dauphinais explained.

Taking effect Nov. 14, the regulation applies to all life insurers that do business in Colorado. It covers a wide range of technology life insurers are using in underwriting including algorithms, predictive models, and online data collection.

All life insurers authorized to do business in Colorado are required to submit a progress report regarding compliance with the regulation on June 1, 2024, and must submit a report attesting that they are in full compliance on Dec. 1, 2024, and annually thereafter.

InsuranceNewsNet Senior Editor John Hilton covered business and other beats in more than 20 years of daily journalism. John may be reached at [email protected]. Follow him on Twitter @INNJohnH.

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