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Narrow Artificial Intelligence Is Latest Disrupter to Insurance Industry

NAI, just like the Industrial Revolution, is going to result in new government programs, as well as new theories of contract law and injury law.
  • Pete Thomas and Samantha Busenhart
  • May 2021
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Society is entering the age of artificial intelligence. Significant players in every industry are implementing narrow artificial intelligence (NAI) to improve their business processes. As a consequence, no element of the global insurance business model will be untouched. Most insurance product lines will need to be reengineered to reflect the new risks arising out of the adoption and deployment of NAI.

Insurers looking to take advantage of the opportunities that will result from the adoption of NAI or looking to mitigate the unintended risks associated with NAI will have to do research or partner with experts. While NAI's algorithms are becoming increasingly ubiquitous and autonomous, they are not without fault. It is helpful to understand the actual capabilities of NAI as opposed to its marketed aspirations and to determine the real risks versus media hype. It is important that algorithms are evaluated on their utility, transparency, accountability, explainability and propensity for bias. There is nothing easy about this kind of evaluation.

NAI is an increasingly integral part of utility, emergency, industrial, transportation, communication, entertainment, financial, medical and governmental infrastructure systems. Consider the “simple” examples of self-driving cars, autonomous robots, computerized investment programs, air traffic control programs, automated 911 systems or robotic surgeons. When a mistake is made by these autonomous programs, how do you assign liability? Can an autonomous program be liable? NAI has the potential to dramatically affect multiple sectors of litigation, including, but not limited to, injury law, insurance law, contract law, civil rights law, criminal law, and employment law. Awards related to such litigation directly impact the financial health of insurers.

This historical pattern is not new. For example, the Industrial Revolution revealed that with most innovations and improvements came new risks, unexpected injury or damage, new ethical considerations, and new theories of law. While the asbestos crisis of the 1980s caught liability underwriters by surprise, it would be unfortunate if NAI also stymied the insurance industry.

The unexpected damages and injuries of the Industrial Revolution inevitably highlight the role of government. One of the primary purposes of government is to protect the public. This is often realized through the creation of laws and promulgation of regulations. Since government cannot prevent all loss, however, to compensate an injured party or remediate property damage, society traditionally turns to six areas to redress the wrong: loss retention, family support, charity, public policy/government programs, insurance or tort liability. NAI, just like the Industrial Revolution, is going to result in new government programs, as well as new theories of contract law and injury law.

NAI, despite the risks, is an exciting innovation that holds great promise. The insurance industry has a vested interest in such technology and needs to collaborate with technologists, legal scholars, legislators and regulators to anticipate the injuries and damage that may result from the deployment of NAI. Collectively, these professionals should help create a rationale and equitable legal and regulatory framework that protects the public.


Pete Thomas

Samantha Busenhart

Best’s Review columnists Pete Thomas is managing director and president of GC Genesis, Guy Carpenter, and Samantha Busenhart is vice president, distribution and thought leadership, Guy Carpenter. They can be reached at bestreviewcomment@ambest.com.


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