Artificial Intelligence (AI) can help insurers enter markets such as large-scale cyber that lack lengthy loss histories, according to a new report from Global Insurance Law Connect. 

AI’s ability to rapidly digest large volumes of data and produce precise analytics can be useful in designing coverage, the lawyer network’s Chair and Sparke Helmore Partner Gillian Davidson says. 

“This improved risk analysis will benefit consumers as it enables insurers to offer more relevant and tailored coverage,” she said. 

Global Insurance Law Connect’s first AI report, with insight from 18 countries on how the technology is affecting the insurance industry, says it offers faster claims processing, improved underwriting, innovative insurance, streamlined administration processes and more efficient chatbots. 

However, algorithms may have inherent biases and lack transparency, raising concerns about data privacy and ethical issues. 

Using AI also increases the potential for cyber-related events. 

The report says the European Union’s forthcoming AI Act is expected to become the benchmark for many jurisdictions around the world, and insurers will be “keenly aware” of the liability, privacy and cyber exposures that could emerge as policyholders adopt AI in their business models.  

The Australian government is considering mandatory guardrails for the use of AI in high-risk settings, either by amending current laws or creating new ones.   

This month, a new online safety code was introduced in Australia covering search engines and providing protection against generative AI-related risks.   

Sparke Helmore Partner and Cyber Insurance Leader Jehan Mata says the government needs greater collaboration with the insurance industry to provide “certainty around legal, regulatory and voluntary AI frameworks, and provide a clear roadmap for their adoption. Otherwise, Australian insurers may be hesitant to embrace AI to its full extent.” 

Rapid expansion in digital techniques to distribute insurance is expected, including smartphone apps that often involve AI, and Global Insurance Law Connect says insurers face a significant risk around data privacy.  

“The processing of vast quantities of personal and often sensitive data will mean that insurers need to have robust procedures to ensure compliance with national and international data protection standards,” it said. 

Ms Mata says the use of predictive AI will need clear parameters and overarching guidance to meet challenges across data privacy, ethics and bias, in order for insurers to manage financial, regulatory, legal and reputational risks. 

See the full report here.