Embracing AI: Influential Trends Shaping Your 2024 Policies

Embracing AI: Influential Trends Shaping Your 2024 Policies | Property & Casualty

Artificial intelligence encompasses machines and devices capable of simulating human intelligence processes, with applications spanning various sectors. Noteworthy implementations include computer vision solutions (e.g., drones), natural language processing systems (e.g., chatbots) and predictive and prescriptive analytics engines (e.g., mobile applications).

Projections from the International Data Corporation estimate that the AI technology and cognitive solutions market will exceed $60 billion by 2025 — a significant increase from $1 billion in 2015. Considering this rapid growth, businesses must gain a comprehensive understanding of AI’s advantages and implications and exposures.

Revolutionizing Risk Management

AI can potentially enhance loss control measures and claims management practices across commercial coverage areas. Your business can leverage AI to mitigate workers’ compensation exposures by promptly diagnosing on-the-job injuries, devising personalized treatment plans, identifying optimal health care providers, analyzing injury patterns, determining root causes of workplace accidents, suggesting preventive measures and streamlining overall claim complexity and associated losses.

Additionally, AI empowers organizations to enhance operational efficiencies through automated workflows, strengthening decision-making capabilities with predictive insights. This integration of technology can mitigate corporate exposures and associated liability concerns. Further, carriers can leverage AI to detect insurance fraud, assess policyholders’ unique risks and provide 24/7 assistance throughout claims processes.

AI-Associated Commercial Insurance Risks

The utilization of human algorithms in AI technology presents the potential for inaccuracies and errors during the initial input process, leading to companywide biases and serious mistakes in corporate decisions. Ethical concerns related to data privacy and protection may arise in certain organizational settings deploying AI technology.

Additionally, the dynamic landscape of federal and state legislation surrounding AI technology demands constant vigilance to ensure compliance and avoid substantial legal penalties. The utilization of AI technology by bad actors poses threats of escalating cyber losses and related claims. The individuals can exploit AI for malicious activities, such as launching malware and social engineering scams, cracking passwords, identifying software vulnerabilities and reviewing stolen data. These activities are occurring at an accelerated pace and boasting greater success rates.

Specific risks and advantages associated with individual lines of commercial insurance include:

Workers Compensation: AI Solutions for Injury Prevention & Management

The implementation of AI technology presents an opportunity to prevent and address occupational injuries. According to industry data, AI has the potential to reduce workers’ compensation claim expenses by as much as 45%. By utilizing advanced imaging, scanning and data analysis, AI can quickly diagnose injuries, provide comprehensive insight into employee conditions and streamline claims management. Integrating AI with wearable devices and sensors enhances real-time monitoring, automates rehabilitation components and adjusts treatment plans based on workers’ recovery progress. Your business can benefit from accelerated recovery outcomes, reduced claim expenses and cost-effective claims management.

Cyber Liability: AI & Cybercrime

The utilization of AI presents both advantages and risks in the realm of cybersecurity. Organizations can leverage AI technology to enhance threat detection efforts, analyze large volumes of data and automate incident response protocols. As nation-state cyberthreats and the corresponding losses become increasingly prevalent, other insurance providers will likely introduce updated war exclusions to safeguard against significant payouts.

AI can also be weaponized by cybercriminals to perform cybercrime more efficiently, leading to higher success rates and more significant damage, all while evading detection. Cybercriminals can exploit AI to:

  • Create & distribute malware
  • Crack passwords
  • Deploy social engineering scams
  • Identify software vulnerabilities
  • Analyze stolen data

Notably, the ability of cybercriminals to develop persuasive phishing messages with AI technology leads to a higher prevalence of such scams.

Directors & Officers: Liability Concerns from Artificial Intelligence Use

An increasing number of public companies (69%) are incorporating AI tools in their due diligence procedures. As AI utilization becomes an integral aspect of corporate decision-making, it’s essential to exercise caution. Although AI tools can improve efficiency and decision-making processes, incorrect implementation or reliance on unreliable inputs can introduce biases, ethical concerns and reduced transparency.

Given the dynamics of changing regulations, executives must adhere to relevant AI legislation to avoid substantial legal penalties and associated D&O losses. It’s important to note that the use of AI in boardrooms is still emerging, introducing uncertainty regarding liability and associated losses. Consequently, determining how D&O coverage will manage AI-related claims might prove challenging, potentially resulting in increased risks and potential gaps in insurance coverage.

Employment Practices Liability: Automated Employment Practices Bias

According to the Society for Human Resources Management (SHRM), up to 85% of organizations now use AI technology for HR operations, including recruitment, hiring, performance evaluations and retention determinations. The incorporation of artificial intelligence systems into employment procedures brings about various employment practices liability risks. Despite being intended to deliver unbiased outcomes, AI systems can lead to discriminatory judgments if they rely on biased algorithms. The EEOC has recently issued guidance highlighting the importance for employers to assess AI systems for potential biases.

In collaboration with various federal agencies, the EEOC recently issued a joint statement expressing its unwavering commitment to enforcing Title VII and other anti-discrimination legislation, given the prevalence of AI technology. Additionally, the EEOC achieved a significant milestone by resolving the first-ever case involving AI-driven discrimination. The settlement involved a company that agreed to compensate $365,000 following a lawsuit filed on behalf of over 200 job applicants. They alleged that the company’s AI-fueled recruitment system was configured to automatically reject applicants based on age.

We’re Here to Help You Navigate AI Risks

Considering the transformative power of artificial intelligence across industries, businesses must strike a balance between leveraging its advantages and managing inherent risks. As AI continues to reshape risk management, commercial insurance sectors must remain vigilant, adapting to its evolving implications. Connect with a member of our team to guide you through these complexities, ensuring you harness AI's potential while safeguarding against associated risks. 

Embracing AI: Influential Trends Shaping Your 2024 Policies | Property & Casualtyhttps://www.cbiz.com/Portals/0/Images/GettyImages-1738586669-1.jpg?ver=bayQXJHB5KDepxaBP08RBg%3d%3dDiscover artificial intelligence's impact on commercial insurance and the need for businesses to navigate its complexities.2024-02-05T18:00:00-05:00

Discover artificial intelligence's impact on commercial insurance and the need for businesses to navigate its complexities.

Risk MitigationProperty & Casualty InsuranceYes