Insuranceciooutlook

How can Insurance CIOs Tackle the Darker Side of AI?

By Insurance CIO Outlook | Tuesday, September 24, 2019

Darker Side of AIWhile the insurance industry enjoys the benefits of AI, managing, and overcoming its dark effects becomes inevitable.    

FREMONT, CA:  With vendors providing turnkey solutions, insurance firms are rapidly taking on artificial intelligence and are in a position to adopt and implement AI-backed applications effortlessly at back-end and front-end systems. Although technology providers have successfully dispelled many apprehensions regarding AI, some associated challenges still remain. Insurance companies have to understand the risks and take a proactive position in dealing with the same. Only then, the sector can deploy AI to reap the best effects. AI is inherently efficient in carrying out tasks and enhancing operational capacities. Insurance firms already find the application of AI in claims management and processing, financial risk management, customer services, and underwriting. The following list comprises some of the risks that insurance firms face upon AI adoption and ways in which CIOs can mitigate them.

• Cyber Frauds

The technology of AI is taking up several roles in an insurance firm, introducing capabilities that were previously unviable. Automation is becoming central to business models. However, the scenario of risk is also changing with the evolving system and network architecture. Previously, firms worked with on-premise, legacy systems, and handled data in old-fashioned ways. With AI, data, and process handling is automated, which is, in turn, exposing insurance firms to cybersecurity risks. Sensitive financial data and customer information are vulnerable to theft and misuse. CIOs must safeguard operations across departments from falling prey to AI-induced security risks. Continuously upgrading risk management strategies along with the implementation of advanced security infrastructure can help CIOs bolster insurance firms' action against potential cyber frauds. Ensuring the use of secure and compliant software solutions, and preventive approach would further enable the mitigation of AI-induced risks.

• Inadequacies and Errors

In the pursuit of transferring controls to computers and connected devices, insurance firms are opting for expedited AI adoption across departments. Rapidly scaling Artificial Intelligence applications can prove to be detrimental to insurance firms and cause adverse impacts. CIOs must acknowledge that AI is just a technology, and it might be susceptible to errors and bias. Insurance companies may run into losses if even one AI application malfunctions. To prevent AI from introducing errors into the systems, CIOs should undertake phase-wise adoption of the technology after a sufficient amount of testing. It is imperative that CIOs determine the suitability and the relevance of AI capabilities for their companies before adopting them at large scales. Adequate infrastructure is also a prerequisite for insurance firms before investing in AI solutions so as to minimize the chances of malfunctions.

• The Quest of Ethics

Deploying AI is simple, but ensuring ethical deployment is a challenge. AI is a relatively recent technology that has proved impactful in the insurance industry. Although regulatory frameworks have started emerging across the globe, there is still a lack of awareness about the ethical aspects of AI usage. The technology gives a lot of powers to businesses, equipping them with vast data-sets and improved analytical abilities that can scan and sort information in real-time. Managing transparency and accountability becomes a stumbling block for insurance firms when data-intensive technologies are adopted. Responsible use of customer information and respecting privacy are crucial, and insurance CIOs must develop an ethical code of conduct for the purpose of AI. Better compliance with industry-based regulations improves ethical models and minimizes violations. Regulatory technology companies that streamline compliance are playing a significant role in guaranteeing ethics in insurance.

It falls upon the CIOs in the insurance industry to manage the darker side of AI and give their enterprises the best outcomes from advanced technological solutions.

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