Insuring the Future: Beneficial AI Use Cases in the Insurance Industry

The New Era of Risk and Technological Opportunity

The property/casualty insurance industry is currently experiencing unprecedented times – navigating a new era of risk and grappling with how to utilize and leverage rapid technological advancements. In terms of risk, property/casualty insurers are experiencing the confluence of extreme weather, inflation and economic uncertainty, legal system abuse, and regulatory challenges. Extreme weather events are increasing in frequency and intensity, and more people are moving into areas considered to be high risk for natural catastrophes. Though the inflation rate declined to 3.4 percent at the end of 2023, after peaking at 9 percent in the summer of 2022, inflation in areas most closely aligned with insurance costs has not slowed at the same pace as general inflation. In terms of legal system abuse, the industry has experienced a rise in class action lawsuits coupled with nuclear verdicts and third-party litigation funding, driving up costs for both insurers and consumers. Finally, insurers are experiencing numerous challenges throughout the regulatory process. In the storm of this new era of risk, one source of light on the horizon is the emergence of new technological applications, specifically artificial intelligence (AI). Insurance has been and always will be a data-driven industry; as such, it is poised to benefit from advances in a data-driven technology field like AI. At its core, AI is advanced data analytics. Often being overlooked in policy discussions as an integral part of the solution to the challenges insurers are facing today, advancements in the field of AI can help in various ways, like increased precision in risk classification and mitigation of claims and perils in the new era of risk. Notwithstanding the challenges of the new era of risk, the insurance industry also faces a changing consumer mindset. As technology evolves, so, too, do consumer expectations. Today’s consumers already interact with AI in a myriad of ways – from the robot vacuum in their homes, digital assistants like Alexa or Siri, and customer service chatbots, to the purchase suggestions on their Amazon accounts.