AI ‘double-sided coin’ that needs ‘experiment-led approach’ in insurance

The integration of artificial intelligence (AI) within the London market poses opportunities and risks for the insurance industry.

That was according to Nicholas Robert, emerging risks modeller at Lloyd’s, who told Insurance Times that that when it came to AI, “optimism should be tempered with awareness of the risks it poses for transparency, ethics, security and safety”.

AI has become more popular in recent years, with large language models such as ChatGPT piquing the interest of many.

However, Robert explained that the industry needed to consider “mitigating the risks” when exploring how “rapidly changing technologies can be applied”.

Iryna Chekanava, senior manager at Lloyd’s Lab, echoed Roberts’ comments as she explained to Insurance Times that the opportunities with AI “stem largely from imagining an ideal and fair scenario”.

“[However], the challenges broadly come from implementing the technology before we’ve fully understood its potential, or without have a clear plan for its use in place,” Chekanava said.

“We can’t be too eager to implement attractive solutions that might leave our customers or markets exposed.”

Implementation

In turn, Robert explained that the implementation of AI in the market was a “double-sided coin”.

Therefore, he felt implementing AI on a trial basis first was key to mitigating risks.

He explained: “When implementing AI, with the potential to transform processes and even entire sectors, it’s important to encourage an experiment-led approach where technologies can be piloted in a controlled environment to ensure efficiency, which can reduce the risks before they’re used more widely.”

One example of this is Lloyd’s Lab, an innovation launched in 2018 that allows insurtech startups to road test ideas.

Over a 10 week period, selected startups are given access to a working space located in the Lloyd’s building, funding and the opportunity to develop products, platforms and processes that will aid in transforming the market.

“Lloyd’s continues in its aim of being a leader in insurance innovation, building on the success of the Lloyd’s Lab and our market’s collaboration,” Robert said.

“That means long-term planning, coupled with a clear strategic direction or use cases, are crucial when thinking how AI can be implemented and adopted.”