In a transformative era marked by technological advancements, the insurance industry is undergoing a paradigm shift, with artificial intelligence (AI) at the forefront of innovation. A recent survey conducted by the National Association of Insurance Commissioners (NAIC) revealed that 58% of life insurers are actively using or expressing interest in integrating AI into their operations.
The NAIC’s Big Data and Artificial Intelligence Working Group shared these compelling findings during their fall meeting in Orlando, emphasizing the growing significance of AI in shaping the insurance landscape. The survey, the third in a series conducted by state insurance regulators, aimed to understand the current use and governance of AI in the insurance sector.
Kevin Gaffney, Vermont insurance commissioner, highlighted the survey’s three primary objectives: gaining insights into AI’s industry-wide usage and governance, collecting information to guide the development of regulatory frameworks, and informing regulators about companies’ current business practices.
While the 58% figure signifies a substantial interest in AI among life insurers, it is noteworthy that it falls behind the enthusiasm expressed by home insurers (70%) and auto insurers (88%) in earlier surveys.
The survey involved 161 life insurers, focusing on those that wrote at least $250 million in national life insurance premiums in 2021 and covered a minimum of 10,000 lives through term insurance during the same period.
The key applications of AI and machine learning in the life insurance sector were identified as marketing and underwriting. Life insurers reported utilizing AI to augment or fully automate processes, reflecting a varied approach to decision-making compared to the auto and home insurance sectors.
Concerns around third-party vendors developing AI and machine learning technologies prompted the NAIC to establish a task force dedicated to regulating these systems by 2024. The lack of control for insurers and regulators over these technologies necessitates proactive measures to ensure responsible and ethical use.
Industry consultants foresee the widespread application of AI in insurance, particularly in conjunction with big data, offering immense potential to refine risk profiles and expedite underwriting processes. However, concerns about potential discrimination and the responsible governance of AI technologies persist.
The survey revealed that 37% of insurers inform policyholders when their data is used for marketing purposes, while 41% provide notifications for underwriting and pricing uses. Additionally, 23% of insurers report informing policyholders about risk management data uses.
Governance practices related to AI and machine learning among insurers showcased a mixed record, prompting the NAIC to emphasize the need for continued study and exploration of these technologies. Gaffney acknowledged the industry’s rapid progression in the AI space, emphasizing the regulators’ commitment to keeping pace with innovations and ensuring alignment with industry practices. As the insurance landscape evolves, the NAIC remains vigilant, recognizing the importance of staying abreast of technological advancements for the benefit of both insurers and policyholders.
