In a recent discussion with Graham Gordon, Product Director P & C at Sapiens, the profound impact, and potential fallout of Artificial Intelligence (AI) in the insurance industry were explored.
Graham shed light on how AI is transforming various facets of insurance operations, presenting both unparalleled opportunities and potential challenges.
A practical example – Graham initiated the discussion by emphasising the transformative potential of AI, urging the audience to grasp the enormity of the opportunity at hand. He shared a practical example of how he, as a non-technical professional, utilized AI to effortlessly generate a magazine aimed at insurance professionals. By inputting a simple prompt into ChatGPT, he swiftly obtained a comprehensive magazine outline, including topics like the digital revolution, regulatory landscapes, climate change, tailored insurance products, and cybersecurity.
He further illustrated the seamless integration of AI into his workflow by using DALI to create a dynamic visual representation of interconnected gears and generating website code through AI prompts. Graham’s experience highlighted how AI, through natural language processing and prompt-based interactions, could enable individuals without coding or design expertise to accomplish complex tasks swiftly.
AI’s penetration into the insurance value chain – Graham emphasised that AI’s impact extends across the entire insurance value chain. From customer segmentation and upsell opportunities to price re-engineering and fraud detection, AI offers a broad array of applications. He cited examples of AI recognition of damage using photo and video recognition software, demonstrating its potential in automating evaluations of damage costs for claims processing.
The discussion touched upon AI’s role in the finance sector, particularly in HR analytics, predicting employee promotions, retention, and identifying employees at risk of leaving. Graham underscored that AI is poised to revolutionise every aspect of the insurance industry.
Challenges and Considerations – In response to me raising pertinent questions about the challenges that smaller players in the industry might face in adopting AI, Graham acknowledged the overwhelming nature of the AI landscape and recommended starting with one or two proven use cases. He emphasised the importance of collaboration and learning from successful implementations, particularly in complex scenarios like handling insurance claims.
Addressing concerns about the potential homogenisation of AI solutions, Graham cautioned against all AI applications yielding identical results. While acknowledging the initial scepticisms in the industry, he cited examples of insurtech companies that had overpromised on AI capabilities but struggled to deliver tangible results.
Cost and evolution of AI – A critical aspect discussed was the substantial cost associated with AI implementation. Graham acknowledged the high initial costs, citing estimates of tens of millions of rand for training a ChatGPT model. He highlighted the ongoing expenses, noting that running a chatbot like ChatGPT could cost millions of rand daily.
However, Graham expressed optimism that these costs would decrease as technology matured, and the return on investment (ROI) became more apparent. He predicted that smaller insurtech companies, unencumbered by large legacy systems, would lead the way in experimenting with and implementing AI.
AI’s Societal Impact and Ethical Considerations – The conversation delved into the societal impact of AI, touching on ethical considerations and potential biases in AI models. Graham acknowledged the importance of building unbiased AI models and stressed the need for a consolidated, truthful dataset to ensure fairness in AI applications. The interview underscored the role of regulators in ensuring fairness and ethical standards in the evolving landscape of AI in insurance.
Striking a Balance between Innovation and Caution – The discussion provided a comprehensive overview of the transformative power of AI in the insurance sector.
While celebrating the myriad opportunities AI presents, Graham acknowledged the need for caution, ethical considerations, and ongoing collaboration to ensure the responsible and equitable deployment of AI in insurance.
Download the results of the Sapiens & The Insurance Network AI survey to discover the potential advantages that AI offers in the insurance industry and gain a more comprehensive understanding of the consequences and obstacles related to its successful integration. Download here: AI in Insurance: Sapiens Survey