Opportunities And Risks Of Artificial Intelligence

Whatever your thoughts on Artificial Intelligence (AI), it is reshaping industries. It is undoubtedly a permanent fixture.

Its influence spans all sectors. From in healthcare, enhancing diagnostics, to manufacturing, which gains increased efficiency and quality control. Generative AI tools can even help write content quickly at scale for any kind of organisation. AI technologies are also revolutionising the insurance sector. They are streamlining claims processing and risk assessment.

Reports show that AI will grow to over $1 trillion (USD) by 2035. AI technology will only become more embedded in our everyday lives.¹

Most of us have been using AI for some time. Whether through:

chatbots;
facial recognition on phones;
Google Search;
or even when sending an email.²

It’s not difficult to see how an AI system can improve processes within many organisations. It simplifies them and shortens resolution time frames.

However, a government report on the impact of AI on UK jobs and training, indicates that certain sectors are vulnerable to AI-related risks. Among these sectors, the finance and insurance industries are the most exposed.³

The risks of Artificial intelligence integration

There are undoubtedly many benefits to powerful AI systems. Some of them include:

increased productivity;
enhanced streamlining;
reduced costs;
and improved customer engagement.

However, there’s no denying that it brings many risks. Here we highlight some of the unintended consequences.

1. Job displacement

Job displacement is perhaps the most prominent concern for employees, and understandably so. This concern is particularly valid if AI surpasses human intelligence. A study by Goldman Sachs revealed that AI could replace the equivalent of 300 million full-time roles.⁴

2. Cybersecurity threats

Cybersecurity and AI safety are also potential vulnerabilities. A National Cyber Security Centre report found that AI would offer an ‘improved capability’ for cybercriminals.⁵ Yet it reported that using AI to improve cybersecurity could offset that threat.

In addition, there are still some unanswered questions about AI decision-making. It remains unclear who is ultimately held accountable for these decisions.

3. Recruitment challenges

Recruitment faces its own AI-related problems. Algorithmic AI bias and discrimination are genuine issues in this field.⁶

A recent study showed that job applicants believe AI-driven recruitment to be less fair than that carried out entirely by humans.⁷

Unions have also voiced their concerns about using AI to make decisions on job appointments. They point out that UK employment legislation is not keeping up with the advancements in AI.⁸

Addressing evolving AI competencies through legislation

Legislation is needed to exploit and protect against ever-evolving AI development and competencies. Governments worldwide are attempting to create such legislation.

The European Parliament has recently produced The AI Act to limit the risks.⁹ Meanwhile, the UK and the USA have signed the first bilateral agreement of its kind. This agreement enables them to collaborate on evaluating the safety of AI tools and their underlying systems.¹⁰

Organisational responsibility in cybersecurity

Cyber risk is an ever-present and evolving issue for companies of all sizes. So organisations must take action. They need to limit the potential damage of an attack.

Cybercrime can destroy companies, creating many consequences including:

reputational damage;
substantial financial losses;
and legal issues where data has been breached.

Cybercriminals' advanced capabilities mean that no business is fully resistant to the effects of an attack. Regardless of how much the business spends on IT security.

Mitigating cyber risks with insurance

Insurance policies, such as cybersecurity and data liability insurance, can help protect against losses from various cyberattacks. For businesses that use AI to provide advice, professional indemnity insurance can cover the risks associated of giving poor advice. This type of insurance helps protect against losses or damages.

Companies without these policies should consult insurers for a full risk assessment.

Future AI risk outlook

The Department for Education recently published a report on the impact of AI on UK jobs and training. It revealed that the finance and insurance sector was more exposed than any other.³However, the integration of AI also brings many benefits that can enhance operations and customer service.

1. Reduced errors and improved accuracy

Traditional claims processing practices rely on manual input of large amounts of data. This job is time-consuming and subject to human error. Processing times are slow, and the risk of loss or theft of physical documents is ever-present.

AI’s data-driven formulas should lead to reduced errors and improved accuracy. Ultimately this can reduce insurer costs and increase payout timeframes.

2. Quicker data analysis

In addition, AI could react more quickly when detecting insurance fraud by using machine learning to analyse data. The speed at which it can analyse large amounts of data and identify patterns is impressive. This capability allows it to offer valuable insights that help support underwriting decisions.

3. Enhanced customer interaction

Features like chatbots are already enhancing human interaction rather than replacing it. This allows clients to access assistance around the clock. At the same time, anticipated advancements could lead to other exciting new solutions.

4. Improved risk assessments

Partnerships with digital companies will also result in improved risk assessments. Automated underwriting and accelerated claims processing are expected to become standard parts of future practices.

However, none of this works without human intervention. Humans will ultimately act as judge and jury, bringing disgruntled customers back into the fold. This ensures that the insurance sector remains fit for purpose in 2024 and beyond.

Key takeaways

AI is reshaping industries and is here to stay. Its widespread influence extends across various sectors, including insurance.
AI brings benefits such as increased productivity and enhanced customer engagement. But it also raises concerns about job displacement and cybersecurity vulnerabilities.
Legislation and government initiatives aim to mitigate AI risks. However, organisations must also take action to ensure data security and privacy.
Insurance policies can help protect against cyberattack losses. For example, cybersecurity and data liability insurance.
AI adoption in the insurance sector promises reduced errors and improved accuracy. It also leads to faster processing times. Yet human intervention remains crucial for decision-making and customer relations.

If you would like to discuss your insurance arrangements, please email Peter Stoll. Or call 07771 691115.

Sources

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Navigating the landscape of AI: The opportunities and risks of artificial intelligence