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

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

Its influence spans all sectors, from healthcare, where it enhances diagnostics to manufacturing, which benefits from increased efficiency and quality control. Generative AI tools can even help write content quickly at scale for any kind of organisation. Additionally, AI technologies are revolutionising the insurance sector by 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, simplifying them and shortening resolution time frames.

However, according to a government report on the impact of AI on UK jobs and training, among the sectors most exposed to AI-related risks are the finance and insurance sectors.³

The risks of Artificial intelligence integration

There are undoubtedly many benefits to powerful AI systems, with increased productivity, enhanced streamlining, reduced costs and improved customer engagement just some of them.

However, there’s no denying that it brings numerous risks, and here we highlight some of the unintended consequences.

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

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 However, it reported that using AI to improve cybersecurity could offset that threat.

In addition, there are still some unanswered questions about AI decision-making and who is ultimately held accountable.

Recruitment faces its own AI-related problems, with algorithmic AI bias and discrimination being genuine issues.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 over using AI to make decisions about job appointments, pointing out that UK employment legislation is not keeping up with AI.⁸

Addressing evolving AI competencies through legislation

Legislation is needed to exploit and protect against ever-evolving AI development and competencies, and governments worldwide are attempting to create it.

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 to enable them to collaborate on evaluating the safety of AI tools and their underlying systems.¹⁰

Organisational responsibility in cybersecurity

However, with cyber risk an ever-present and evolving issue for companies of all sizes, organisations themselves must take action 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 a wide range of cyberattacks. For businesses that use AI when offering advice, professional indemnity can protect against the risks associated with poor advice that leads to losses or damages.

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

Future AI risk outlook

A report by the Department for Education on the impact of AI on UK jobs and training recently revealed that the finance and insurance sector was more exposed than any other.³

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, on the other hand, should mean reduced errors and improved accuracy, ultimately reducing insurer costs and increasing payout timeframes.

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 also means that it can offer valuable insights that help support underwriting decisions.

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

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 and ensuring that the insurance sector remains fit for purpose in 2024 and beyond.

Key takeaways

• AI is reshaping industries and is here to stay, with widespread influence across sectors, including insurance.
• AI brings benefits such as increased productivity and enhanced customer engagement but raises concerns about job displacement and cybersecurity vulnerabilities.
• Legislation and government initiatives aim to mitigate AI risks, but organisations must also take action to ensure data security and privacy.
• Insurance policies like cybersecurity and data liability insurance can help protect against cyberattack losses.
• AI adoption in the insurance sector promises reduced errors, improved accuracy, and faster processing times. However, 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

1. gov.uk/a-pro-innovation-approach-to-ai-regulation-government-response
2. theguardian.com/a-day-in-the-life-of-ai
3. assets.publishing.service.gov.uk//Gov.UK_Impact_of_AI_on_UK_Jobs_and_Training.pdf
4. forbes.com/goldman-sachs-predicts-300-million-jobs-will-be-lost-or-degraded-by-artificial-intelligence
5. ncsc.gov.uk/impact-of-ai-on-cyber-threat
6. bbc.com/ai-recruiting-hiring-software-bias-discrimination
7. personneltoday.com/unfair-untrustworthy-candidates-verdict-on-ai-in-recruitment
8. bbc.co.uk/business-66248125
9. bbc.co.uk/technology-68546450
10. bbc.co.uk/technology-68675654

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