‘A game changer for insurance companies.’

That is how Kathleen Birrane, US insurance regulatory practice leader at DLA Piper, described AI technology in an interview with Insurance Business.

Her insights reflect a broader trend towards AI adoption within the insurance sector. According to TechRadar, ‘a third of major insurers already have Gen AI use cases in production, while most are advancing their data capabilities.’

AI and insurance practice

Danny Tobey, global chair of DLA Piper Americas AI and Data Analytics Practice, argues that AI can help insurance companies comply with regulatory guidelines and minimize risk when writing policies.

He noted that ‘our goal with proactive compliance is to look at the much earlier set of communications and other unstructured data, where some of these bad ideas get started, and that allows us to find things much earlier and do corrective actions like education or improvements to policies…’

A report by KPMG highlights AI’s potential to mitigate risk: ‘With enough training data, these algorithms can better analyze risk and predict outcomes, adding accuracy to risk models and pricing structures. These solutions are often developed to solve a specific problem, but there is an opportunity to quickly adjust for wider use across the value chain.’

AI not only has the potential to help with regulatory compliance and risk mitigation but also to boost the economy and improve the insurance landscape as a whole.

‘Research from McKinsey reveals that Generative AI alone is projected to contribute up to $4.4 trillion to the global economy annually, with insurers expecting gains in productivity, premium growth, and underwriting accuracy,’ TechRadar reported.

How brokers can use AI

Birrane emphasized that generative AI technology, while assisting insurance companies with compliance and risk management when writing policies, could also help brokers with client compliance and risk mitigation: ‘Brokers are guiding businesses in how to manage risk in a way that helps with their underwriting, you know, that side of their risk profile,’ said Birrane.

She also mentioned that for brokers, generative AI tech can identify potential risks and inform clients about actions they can take to mitigate these risks: ‘This is an important tool in a broker’s box to make their clients aware of things that they can do to mitigate AI and other risks,’ she said.

Clients and AI integration

Birrane noted that not only can brokers use AI to support their clients, but clients can also be advised to adopt AI to enhance their attractiveness to insurance companies.
She said, ‘Businesses that buy insurance need to be thinking about their AI hygiene as well… proactive compliance has a role to play in risk mitigation. For businesses that utilize AI as a risk control mechanism, it makes them a better risk for an insurance company.’

AI adoption and considerations

According to Tobey, AI adoption is something that companies should seriously consider:
‘The whole goal is the early detection of risk and prevention of very expensive harms, and that’s what this technology is so good at. And you can do it in a way that is responsible, with strong controls around it. But you can’t bury your head in the sand.’

KPMG echoes these sentiments, suggesting a well-coordinated and thoroughly thought-out approach: ‘Chief technology and chief finance officers, along with senior leadership teams (including chief data officers and chief transformation officers), will need to quickly identify and develop their AI strategy, carefully navigating the balance between embracing innovation, understanding their barriers to adoption, and mitigating emerging risks,’ it stated.

While AI implementation requires caution, it clearly offers tremendous potential within the insurance industry, and it is time for insurance professionals to embrace its capabilities.