Insurers are said to be facing a “significant risk” with regards to data privacy, which could be aggravated further by the widespread adoption of artificial intelligence (AI).
However, the processing of extensive quantities of personal, and quite often, sensitive data will mean that insurers need to have robust procedures to ensure compliance with national and international data protection standards.
This stems from recent research conducted by Global Insurance Law Connect (GILC), who launched its first ‘Artificial Intelligence Report’, providing insights from 18 countries on how AI technology is impacting the insurance industry in their own markets.
“AI has already become an essential part of our daily lives and is quickly making its way into the insurance sector. This trend is expected to continue as AI offers numerous benefits including faster claims processing, improved underwriting, innovative insurance products, streamlined administration processes, and more efficient chatbots,” commented Gillian Davidson, GILC’s Chair and Partner at Sparke Helmore.
GILC’s research clearly highlights the ability that AI possesses to quickly analyse vast quantities of data, ultimately making it a powerful tool for insurers in terms of predicting and assessing risks.
Davidson, added: “The use of AI can help insurers enter markets that may be challenging due to lack of lengthy loss histories for certain types of risks. AI can rapidly digest large volumes of data and produce more precise analytics, which can be useful in designing coverage for large-scale cyber incidents, for example.
“Ultimately, this improved risk analysis will benefit consumers as it enables insurers to offer more relevant and tailored coverage to their customers.”
Moreover, GILC noted that insurers need to be mindful of the need to have measures in place to safeguard against data breaches. As well as this, the firm believes that insurers need to have adequate processes in place to handle the reporting and management of any breaches should they occur.
Davidson, said: “Currently, insurance solutions tailored to the risks associated with artificial intelligence are still in the early stages of development. However, as the technology advances and becomes more prevalent, and regulatory bodies sharpen their focus, we can expect an increase in AI-targeted risk solutions.”
Interestingly, GILC also showcased how across many markets, AI is being utilised, and is likely to be adopted to optimise distribution models.
The company reflected on the COVID-19 pandemic, and noted how it accelerated a shift by many insurers towards digital and online tools, therefore replacing traditional distribution models.
In GILC’s view, the industry is likely to see a similar rapid expansion in the use of digital techniques.
Ultimately, this trend will be especially beneficial in markets with low insurance penetration, the company noted.
