If you were to sum up 2025 in one word, it would be AI. Artificial intelligence has dominated conversations in all industries as people discuss its immense potential and the many unknowns about this tech field. One notable industry where the technology is being leveraged is the insurance industry, and its incorporation has come with many opportunities while also creating new risks.
McKinsey & Company data shows that insurance firms have recorded a 10-20% success rate in improving the performance of new agents and they have seen premiums grow at about 10-15% through the use of AI. These are no small achievements, and they highlight how much the industry could benefit as more functions and entities adopt the technology.
However, AI is rapidly evolving and is still in its relative infancy. As is the case with all new things, they go through a number of growing pains, and the insurance industry is concerned about the potential pitfalls of this growing phase.
Of key concern is how AI systems are created. Companies are grappling to understand how AI models are created and how they are trained, because this influences the extent to which any inherent risks can be addressed and to what extent the model can be relied upon. Already, lawsuits have emerged on matters like violations of data privacy, infringement of intellectual property, bias and discrimination.
To counter some of these risks, insurance firms need to establish strong governance boards that command the necessary experience in the field. These boards can then create an appropriate framework that entails procedures, education, training, policies, security mechanisms and testing protocols so that the desired outputs, implementation and usage of AI can be undertaken in ways that ensure ethics, safety and responsibility are at the forefront in everything.
These systems are especially important given that insurance companies have many touch points for its employees and management to interact with the AI system. This creates various points of vulnerability that can be exploited by persons with ill intentions, so security concerns become paramount.
The fact is that AI is here, and it is going to be around forever in some form, shape or way. Its ability to be autonomous and think will keep growing as time goes by, so it is prudent for insurance firms to start polishing how they embrace it, but with caution since it is prone to making unexpected errors. Corporations like Berkshire Hathaway Inc. (NYSE: BRK.A) (NYSE: BRK.B) that have a considerable stake in the insurance industry ought to keep tabs on developments in the field and find ways to be at the forefront of this emerging “new normal.”
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