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Is the Insurance Sector Risking Over-Reliance on Artificial Intelligence? Part Two

This March, The Fintech Times has turned Its focus towards insurtech, shedding light on the innovative advancements and sustainable initiatives within the insurance sector.

Today, we explore the role of artificial intelligence in insurance and the delicate balance between leveraging technology and preserving human expertise.

Is the insurance sector risking over-reliance on artificial intelligence, and what’s the balance between innovation and human expertise?

In part two of our spotlight on AI, let’s hear more from our community… (part one here).

Allianz Partners
Simon Powell, head of travel claims at Allianz Partners,
Simon Powell, head of travel claims at Allianz Partners,

Simon Powell, head of travel claims at Allianz Partners, one of the UK’s largest travel insurers, addresses the integration of AI alongside experienced colleagues to streamline travel claims processing.

“We very much see AI and people working alongside each other: we are already using AI alongside experienced colleagues to speed travel claims for clients. We use AI to pick up some routine administration and to straight through process straightforward claims frees up staff to focus on more complex and involved claims – for example medical repatriations – that need their skilled and experienced management.

“Allianz Partners has got two AI bots working on travel claims. The first of these, Edith, can handle claims submitted through our own portal which often white labelled in partners’ apps. For simple claims, such as flight delays, which meet our criteria Edith will check the claim against then policy rules and can move directly to settlement, giving us genuine straight through processing capability.

“Florence, the second bot picks up some of the routine administration that can slow down claims – for example it automatically chases customers to provide documents that they’ve promised to get to us. The quicker we get them, the faster we can settle the claim.

“Right now Allianz is using AI to help improve its claims customer service. However, we do see future roles for the technology across the entire customer journey, which includes being able to deliver personalisation at scale.”

Publicis Sapient
Daniel Cole, senior MD financial services and insurance, Publicis Sapient

Daniel Cole, senior managing director, financial services and insurance at digital transformation company Publicis Sapient, highlights the significant opportunities AI presents for the insurance industry.

“AI presents much opportunity for the insurance industry from enabling greater robustness of customer engagement, giving customer operations ”super-powers’ in the background while unlocking efficiency at the same time. However, the risks for AI are real and have been well reported on a cross-industry basis.

“We need to remember that the adoption pace by the large insurers is still slow, steady and narrow – typically around pricing analytics and machine learning orientated operations. Many insurers are still grappling with their data – the very cornerstone of getting AI to work well.

“But the sooner that insurers start establishing robust guard rails, governance and processes, the sooner they can start realising the true value of AI.”

Mphasis
Vijay Mahendrakar
Vijay Mahendrakar, head of insurance business solution, Europe at Mphasis

The insurance sector has currently reached the crossroads of advancing with the power of AI and rethinking the concerns about over-reliance, according to Vijay Mahendrakar, head of insurance business solution, Europe at information technology services and consulting company Mphasis.

“AI has been a game changer and excelled in analysing vast data sets, enabling accurate risk assessments, fraud detection, and streamlined claims processing. For instance, it has the potential to offer personalised coverage and pricing tailored to customers’ needs. However, there are concerns about potential biases in algorithms, diverse and dynamic nature of threats and lack of transparency in decision-making.

“Hence striking the right balance between automation and human expertise is crucial to enhance efficiency without compromising risks due to automated decisions. Human intervention and expertise are crucial in areas like complex risk analysis, ethical considerations, and building trust with customers. AI is augmenting human capabilities rather than replacing them.

“So, insurers are looking at a collaborative approach in dealing with AI now. This is done through transparency at every stage and preventing some tasks from being fully automated by keeping humans in the loop as it is important until the technology fully matures.”

Protegrity
Alasdair Anderson, vice president at data protection company Protegrity.
Alasdair Anderson, vice president, Protegrity.

“The potential of AI and the ambitions of AI advocates continues to grow, the insurance sector finds itself at an important juncture,” says Alasdair Anderson, vice president at data protection company Protegrity.

“Yes, artificial intelligence brings dazzling efficiency and precision to our fingertips, but it also whispers the question of over-reliance. My perspective? It’s crucial we don’t lose sight of the human element that’s always been the backbone of insurance.

“AI is a tool, not a silver bullet. It offers a way to analyse data at a speed and scale never seen unearthing insights that might otherwise remain buried. However, the essence of insurance goes beyond algorithms and data points; it’s about understanding life’s complexities and offering a safety net that’s as much about empathy as it is about economics and data.

“The real magic happens when we blend AI’s analytical prowess with the nuanced judgement and emotional intelligence that only humans can provide. This balance ensures that while we embrace the innovations AI brings to our sector, we also preserve the irreplaceable human connection that builds trust and loyalty with our clients which also goes hand in hand with keeping their data secure.

“Embracing AI shouldn’t mean sidelining the human touch. Instead, it’s about forging a future where technology reinforces our human strengths, ensuring the insurance industry remains both innovative and inherently human. However, in doing this it is critically important that customer data remains secure and only relevant data is shared across AI platforms.”

SS&C Blue Prism
Rob Paisley, industry director for financial services and insurance at SS&C Blue Prism,
Rob Paisley, industry director for financial services and insurance at SS&C Blue Prism

Despite the uptake of AI within insurance firms, no insurers are relying on AI to make decisions, suggests Rob Paisley, industry director for financial services and insurance at SS&C Blue Prism, a specialist in digitising operations across financial services, insurance, health and pharma, and banking.

“AI is only useful when it works in tandem with human intelligence. In the insurance industry, AI helps  underwriters identify risks and threat vectors, helping them to work more efficiently. AI’s revolutionary ability to help humans identify hidden patterns, signals and opportunities is an industry game changer.

“It has the potential to create new niche insurance businesses with unique coverage parameters. However, these models need constant retraining to remain accurate. Humans need to identify obvious errors and inconsistencies that help improve model performance. That feedback loop is also essential to maintain model health and prevent bias.

“By delegating certain tasks to intelligent automation, workers can optimise their time, prioritising business expansion. A human-centric approach to governance, including mandatory awareness, transparency, and policy enforcement, is essential to strike the right balance.

“Achieving a balance between AI and human expertise will be pivotal for insurance enterprises to fully capitalise on the advantages of AI while navigating its limitations. Only a joint effort can propel insurance companies into the future. Without this, companies risk over-using AI and not drawing on the creative benefits of having human intervention alongside AI-led innovations.

“To summarise the true impact of AI on the insurance industry, I would reframe it as augmented intelligence. These tools are designed to improve human performance rather than replace it.”

SAS UK & Ireland
Andrew Pollard, Insurance Specialist at analytics specialist SAS UK & Ireland.
Andrew Pollard, insurance specialist SAS UK & Ireland.

Over recent years, we’ve seen more insurers turn to AI to provide the best, personalised experience for their customers, while also helping facilitate innovative risk solutions, outlines Andrew Pollard, insurance specialist at analytics specialist SAS UK & Ireland.

“While there aren’t any tangible indications to suggest the insurance industry is relying too much on AI, like everything, there must be a balance to ensure the right safeguards are in place for AI to work effectively and complement human efforts.

“For one, it’s vital that AI models are transparent so that decision-making can easily be explained to regulators or customers. New research has emphasised this priority for insurers, with many now turning to their AI software vendors for guidance.

“To avoid the consequences of over-reliance on new technologies, insurers will also want to make sure they account for common pitfalls like bias. If AI or machine learning is applied to data that is inaccurate, it has the potential to magnify the errors and cause unintended bias in results – which is why human intervention is still vital at various points of AI implementation and beyond.

“The right AI modelling can help reduce bias, alongside significantly speeding up the process through automation. Ultimately, it’s all about finding a happy equilibrium between AI innovation and human expertise – with AI providing the leg work and human oversight ensuring the technology is utilised to the best of its ability.”

One Inc
Ian Drysdale, CEO at One Inc
Ian Drysdale, CEO at One Inc

Ian Drysdale, CEO of One Inc, a digital payments network for the US insurance industry, acknowledges the significant advantages AI offers to insurers in enhancing operations and customer support, but highlights concerns around biases and privacy risks,

“The insurance industry, traditionally slow to adopt new technologies, faces a shifting landscape with the emergence of innovative startups and established giants venturing into the sector. This prompts traditional insurers to catch up or risk being left behind.

“The rise of artificial intelligence offers significant advantages to insurers, including smoother operations, better risk evaluation, and improved customer support. Predictive and prescriptive analytics are particularly valuable, enhancing underwriting capabilities and managing loss ratios effectively. These technologies can predict the likelihood of water loss and recommend where to place sensors. In the event of a car accident, they not only estimate the loss but also can outline necessary repairs and recommend an auto shop.

“However, social concerns and risks hinder widespread adoption, with some fearing that dependence on AI algorithms may exacerbate biases, compromise privacy, and erode human judgment.

“Despite these challenges, finding a balance between AI and human expertise is achievable. While AI and automation streamline processes and enhance efficiency, human judgment offers intuition, empathy, and nuanced understanding.

“Integrating AI and human expertise improves accuracy in underwriting and claims processing while maintaining customer trust. This symbiotic relationship enables insurers to adapt to market changes while providing personalized service. Embracing innovation while honoring human insight is pivotal for the insurance sector’s success in the digital era.”

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