Responsible Use of AI in Insurance: A Path to Smarter, Ethical Integration

AI in Insurance: The Path to Smarter, Ethical Integration

Among the most significant trends shaping the insurance industry—alongside macroeconomic uncertainty, automation and cloud adoption—Artificial Intelligence and machine learning stand out as transformative forces. It’s not overstating it to say, “We haven’t seen anything like this.”

The potential is undeniable. For insurers, AI can drive productivity, reduce costs, optimize revenue, manage risk and enhance customer experience. No wonder these benefits fuel the widespread adoption of AI-driven tools, especially generative AI (GenAI).

But beyond GenAI’s rapid proliferation lies a crucial question:

How do we ensure responsible and strategic AI use? Just because we can adopt and use AI so easily doesn’t mean we should do so indiscriminately.

The key lies in balancing innovation with responsibility—leveraging AI’s transformative power and your software vendor––while ensuring accuracy, fairness and a customer experience that fosters trust, not alienation. It begins with understanding.

2024: The Worst AI You’ll Ever See 

(Because it’s only going to get better)

For the insurance industry––and many others––2024 marked a turning point in AI adoption. From using ChatGPT to punch up writing to predictive analytics, GenAI is becoming an industry standard, accelerating faster than many organizations can keep up with.
Unlike past technological shifts—the introduction of computers, the Internet or automation—AI doesn’t just make work more efficient. It has the potential to do the work itself.

And therein lies the challenge (and the basis of some discomfort). When implemented without careful oversight, AI can create significant risks, from biased decision-making to regulatory compliance failures.

The path forward demands a thoughtful approach. One with an experienced partner who’s thought through the short- and long-term AI ramifications. AI is a powerful tool, but it should function as a guide rather than the sole driver of decision-making. (Think self-driving cars. At the moment, we’re not at a point where we love sitting in the passenger seat).

AI in insurance is advancing rapidly, but full autonomy remains risky. The human element—insight, empathy, instinct and strategic oversight—remains irreplaceable. It’s important to develop an AI-driven software strategy that allows for the human connection to thrive rather than be diminished. 

AI in Insurance: A Dual Focus on Innovation and Responsibility

The evolution of AI in insurance can be categorized into two key areas: the capabilities AI brings to the industry and the ethical considerations that must guide its deployment.

1. AI’s Role in Insurance
   
   AI is already making a measurable impact across various functions within insurance companies:
   
   
   • Productivity tools: Cross-functional AI solutions, such as AXA’s Secure GPT, enhance employee efficiency. Role-specific AI copilots, like Google’s Agent Assist, provide real-time support for insurance professionals.
     
     
   • Self-service customer support: AI-powered chatbots can handle routine customer requests and questions such as policy comparisons. However, they should complement—not replace—human interactions, particularly in complex policy discussions and planning.
     
     
   • Unstructured data capture: GenAI tools can extract and categorize information from emails and other text sources, improving claims experiences and risk assessment.
     
     
   • Claims processing: AI enables automation of first notice of loss (FNOL), damage appraisal, and claims triage to hasten a satisfying resolution.
     
     
   • Underwriting: AI-driven data ingestion automates verification, allowing underwriters to focus on delivering a more personalized, human touch.
     
     
   • Regulatory compliance: AI supports anti-money laundering (AML) and Know Your Customer (KYC) compliance, automating risk assessments and regulatory reporting.
     
     
   • AI’s ability to accelerate operations is undisputed. But speed and efficiency should never come at the expense of accuracy, fairness or consumer trust. That’s where responsible AI implementation comes in.
     
     
2. The Imperative of Ethical AI in Insurance
   
   As AI adoption surges, regulators are stepping in to ensure its responsible use. Two examples:
    
   • In the United States, Colorado led the way in 2023 with stringent regulations on predictive model governance.
     
     
   • The National Association of Insurance Commissioners (NAIC) introduced a model bulletin to help states establish AI compliance frameworks.
     
     

For insurers, these developments underscore an urgent priority: AI must be implemented in a way that is transparent, fair and compliant with evolving regulations. In its own way, AI can handle the so-called “mundane” so you can build stronger customer relations and experiences, plus spend more time innovating intuitive solutions.

Ensuring AI Works for Insurers and Their Policyholders

To reap AI’s full benefits while minimizing risks, insurers must commit to a responsible AI strategy. This means focusing on three key areas:

1. Human oversight and customer-centricity
    
   • AI should enhance human decision-making, not replace it.
     
     
   • Customers expect personalized, empathetic service. AI should be used to empower employees, not create a robotic, impersonal experience. For example, AI can quickly pull up policyholder information and summaries, enabling the representative to be more responsive and helpful in the moment.
     
     
   • The role of human judgment is crucial, particularly in nuanced claims handling and underwriting decisions.
     
     
2. Transparency and bias mitigation
    
   • AI models must be regularly audited to prevent biases that could lead to discriminatory outcomes. Often the software itself does some of this during an upgrade, but it’s learning based on outcomes.
     
     
   • Insurers should establish clear AI governance policies to ensure accountability.
     
     
3. Proactive compliance and adaptation
    
   • With AI regulations evolving, insurers must stay ahead of compliance requirements.
     
     
   • AI should be aligned with ethical guidelines to safeguard against reputational risks.
     
     
   • Responsible AI use can become a competitive advantage, strengthening consumer trust.

The Human-AI Balance: A Competitive Differentiator

For insurers that pride themselves on the human touch, AI may seem counterintuitive. But it presents an opportunity to amplify—not diminish—the personal connection with policyholders. Consumers are wary of AI-driven interactions that feel transactional or impersonal.

Meanwhile, for IT departments at insurance companies, their own human influence must find a balance with the AI-driven solution they put into place. Whether it’s AI solutions for consumers or within your own department, similar aspects of a well-integrated AI strategy apply.

• AI handles routine tasks, freeing up human agents for meaningful, high-touch interactions.
  
  
• Whether it’s stakeholders or policyholders, they want to feel heard, not just processed. 
  
  
• AI complements human expertise and its presence rather than replacing it.

A Commitment to Responsible Innovation

AI is here to stay. Trillions in investment make this all but certain. Its impact on insurance will continue to grow, reshaping operations, risk management, and customer engagement.

But this moment represents an inflection point:

As AI continues to evolve, insurers must commit to proactive governance, ensuring AI remains a tool for empowerment rather than a liability. Is your company ensuring AI compliance and fairness? Here’s where to start.

First, have the right knowledgeable partner.

This is critical. A partner immersed in the software and AI space can advise you on the right approach, to guide your AI strategy rather than resist it or be uncertain about it. A partner that ensures you stay committed to learning and understanding not just how the tools work, but how AI will affect operations and company values. To drive innovation while upholding ethical standards. To optimize efficiency while preserving human judgment.

Responsible AI isn’t just a regulatory necessity—it’s a strategic imperative. One that you shouldn't tackle alone, especially at this stage of overall AI adoption.

By embracing AI thoughtfully and ethically, insurers can harness their full power while maintaining the integrity, accuracy, and personal service that define their success.