AI potential vs. risks: What P/C insurers are doing

By Susan Rupe

Artificial intelligence is poised to transform the insurance landscape, but the path forward remains uncertain. How are property/casualty insurers using AI's potential while also managing its risks? A panel of experts gave their views during an Insurance Information Institute webinar.

Three primary uses of artificial intelligence show the most potential for the industry, said Matthew McHatten, president and CEO of MMG Insurance. They are:

Reduced transactional friction. Artificial intelligence can reduce the amount of “back and force in everything we do that is increasingly less tolerated by the consumer” during insurance transactions, he said. “AI gives us a better opportunity to have more customer knowledge at the point of action, leading to better outcomes.”
Customer experience. McHatten said AI enables insurers to respond to customer needs more quickly and serve customer needs proactively.
Competitive pricing. “Better data and better processes lead to reduced expenses,” he said.

AI speeds up underwriting

Jennifer Kyung, vice president of P/C underwriting with USAA, said artificial intelligence is helping speed up underwriting and gain more insights for underwriters.

In addition, AI can look at aerial images of property and determine whether there is a potential risk, enabling insurers to reach out to their customers about mitigation tactics. AI also can read through call transcripts and categories themes that help insurers with action items to improve their member service.

“It helps us look at broader swaths of data in claims files,” she said. “We look at it as an aid as opposed to a black box.”

Coverage for AI risk is at the same point today that cyber insurance was 25 years ago, said Iris Devriese, underwriter and AI liability lead with Munich Re. She described three types of risk solutions that are in demand.

Contractual liability policies cover warranty payouts. The AI vendor is financially protected while its customers are assured of the necessary return on their investment.
Artificial intelligence liability policies for AI vendors and corporations implementing AI, protecting them from AI-related lawsuits in an uncertain legal environment.
Financial damage policies for AI model usage, empowering corporations to adopt and rely on artificial intelligence and to invest in the future.

The foundation of ethical AI use is education, said Mike Fitzgerald, advisory industry consultant with SAS.

“Educate everyone, starting with your executives, on what these tools do,” he said. “Then build an AI systems plan that’s very broad, very deep and very specific. Each insurer will have to come up with their own plan, determining how they will combat bias and protect data.”

Susan Rupe is managing editor for InsuranceNewsNet. She formerly served as communications director for an insurance agents' association and was an award-winning newspaper reporter and editor. Contact her at [email protected].