AI can reshape the insurance industry, but carries real-world risks
Insurers must balance AI innovation with caution, ensuring human oversight remains central instead of allowing algorithms to operate unchecked.
AI is creating new opportunities for the insurance sector, from faster claims processing to enhanced fraud detection.
According to Jeremy Stevens, head of EMEA business at Charles Taylor InsureTech, AI allows insurers to handle repetitive tasks in seconds instead of hours, offering efficiency gains and better customer service. Yet these opportunities come with risks, especially if AI is introduced without thorough oversight.
Poorly deployed AI systems can easily cause more harm than good. For instance, if an insurer uses AI to automate motor claims but trains the model on biassed or incomplete data, two outcomes are likely: the system may overpay specific claims while wrongly rejecting genuine ones.
The result would not simply be financial losses, but reputational damage, regulatory investigations and customer attrition. Instead of reducing costs, the company would find itself managing complaints and legal challenges.
To avoid such pitfalls, AI in insurance must be grounded in trust and rigorous testing. Systems should never operate as black boxes. Models must be explainable, auditable and stress-tested against real-world scenarios.
It is essential to involve human experts across claims, underwriting and fraud teams, ensuring AI decisions reflect technical accuracy and regulatory compliance.
For sensitive functions like fraud detection, blending AI insights with human oversight prevents mistakes that could unfairly affect policyholders.
While flawed AI poses dangers, ignoring AI entirely risks even greater setbacks. Insurers that fail to modernise may be outpaced by more agile competitors already using AI to deliver faster, cheaper and more personalised services.
Instead of rushing or delaying adoption, insurers should pursue carefully controlled pilot projects, working with partners who understand both AI systems and insurance regulation.
In Stevens’s view, AI should enhance professional expertise—not replace it—striking a balance between innovation and responsibility.
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