Artificial Intelligence: The Risks & Rewards for Business and Insurance
The topic of Artificial Intelligence (AI) is very much part of the cultural conversation, and we are all seeing AI’s impact in many facets of life already. Naturally, that includes a significant impact on business.
AI has huge potential to make life easier for businesses. For example, by improving the customer journey and the speed of service delivery.
But while there are rewards for businesses, there are also risks associated, much like with any new technology. AI is evolving at a rapid rate, so these risks do not remain constant.
As businesses look to innovate and adopt AI, it’s crucial they stay across the risks as they evolve, and to consider how such technology might impact their insurance needs.
The risks and impacts will be unique depending on how each business uses AI technology. In a rapidly developing field, staying truly informed is a significant challenge for any business. This is where brokers have an opportunity to provide support and education.
Vero’s SME Insurance Index 2024 found that nearly half of the businesses surveyed say they are already using AI technologies. Furthermore, 29% say they are considering doing so in the future. Just 10% say they have no plans to use AI.
2024 SME Insurance Index Report: Business use of AI technology
This demonstrates that AI is already likely to be impacting many brokers’ clients. But how many of these businesses are considering what AI means for their risk overall, and for their insurance?
Around 3 in 4 businesses say they are considering insurance when adopting AI. Larger businesses are slightly more likely to say they’ve factored in their insurance.
How accurate is this perception? Are businesses really doing what is needed to mitigate their risk and get the most from AI?
Gabrielle Hutton, Risk Engineering Lead, Liability & Emerging Risks at Vero, outlines some key risks businesses may not be considering.
One significant risk is cyber security, an issue we see playing out frequently in the media. Have businesses using AI adequately prepared for the possibility of a cyber-attack? The Vero SME Insurance Index suggests only half of businesses using AI have considered this.
Transcript
There's a huge opportunity for brokers to help clients understand where and how they might be exposed to emerging risks, including those related to AI. This includes helping to implement robust risk management programs.
Artificial intelligence technology, AI, is evolving quickly. The associated risks for a business are changing quickly too. Businesses need to understand how changes in this space will impact them. The exact risks faced will depend on how an organization uses or engages AI. Some common risks include:
- Data quality: AI is only as good as the data put into it. Good inputs mean better outputs.
- Cyber and data security: We've all seen examples of where AI cybersecurity wasn't managed effectively. This impacts the reputation of a business.
- Potential data bias: A lack of transparency could mean working with AI technology that contains a bias in the data or code.
- And finally, opportunity risk: Businesses need to consider the impact of not engaging with AI technology. It could mean being left behind.
A corporate governance framework that effectively addresses AI and data ethics is essential. Businesses should look to support AI technology that is human-centric, transparent, explainable, safe, secure, and reliable. This, along with related risk management and training, is key.
As part of Australia's ethics AI framework, several principles have been established. Getting across these is crucial for any business looking to add further rigor to their own frameworks.
There's a huge opportunity for brokers to help clients understand where and how they might be exposed to emerging risks, including those related to AI. This includes helping to implement robust risk management programs.
The first step is to understand how clients use AI and how they may be planning to leverage this technology in the future. The 2024 Vero SME Index found that many businesses are already receiving information on emerging risks from their broker. This is really encouraging because businesses need to understand what's on the horizon so they can build resilience and be prepared.
It's important to encourage clients to set risk management frameworks and stay across issues that may impact the sustainability of their business.
If I could leave you with a parting thought, it's that AI technology is just one part of a changing business landscape. Clients need to keep up with change and identify new opportunities. They should also establish risk management frameworks.
The International Risk Governance Council has some useful guidelines on their website that may be useful for brokers to share. These can help businesses to address and manage emerging risks.
Speak to your local Vero representative today for more information.
Another such risk is bias in data. As Gabrielle Hutton notes, AI is only as good as the underpinning data. If bias exists in their data, then businesses need to be aware it will also exist in the tools and results AI provides them.
Yet, there is a counterpoint to consider. If businesses are slow to adopt AI, they run a different but equally significant risk – being left behind.
Through close partnerships, brokers, insurers and businesses can optimise the possibilities of AI, whilst managing the risks together.
Brokers have an opportunity to help educate their clients around AI. This could include support with good governance, data privacy and ethics in AI. And, of course, in developing a solid risk management framework.
Brokers and insurers can also benefit from AI tools, with 2 in 3 businesses contributing to the Vero SME Index, responding positively to the role AI can have in insurance. For example, the likelihood of AI delivering a faster and smoother claims experience.
A combination of education, support and improved service delivery is where AI’s potential lies for brokers and businesses. Ultimately, it’s about being proactive in every aspect of AI.
Watch the VERO SME Index webinar to learn more about AI and risk or download the full report here.
AAI Limited ABN 48 005 297 807 trading as Vero Insurance (Vero) has prepared the Vero SME Insurance Index Report (Report) & Webinar. The information in the Report & Webinar is general information only and is not intended to be relied upon – please make your own enquiries. Subject to any rights you may have under any law, Vero and its related bodies corporate do not assume or accept any legal responsibility for any loss or damage, including loss of business or profits or any other indirect loss, relating to the Webinar & Report. Vero and its related bodies corporate do not guarantee the accuracy, reliability, completeness or currency of the information provided. The Webinar & Report are not a recommendation or statement of opinion about whether a reader or viewer should acquire insurance from Vero (or its related bodies corporate) or services from any insurance intermediary or otherwise alter their business arrangements. The Webinar & Report are based on commissioned research by Vero and should not be used as the basis for any decision in relation to the acquisition or disposal of insurance products or the use of broker services. Readers should confirm information and interpretation of information by seeking independent advice.
Insurance issued by AAI Limited ABN 48 005 297 807 trading as Vero Insurance. Read the Product Disclosure Statement before buying this insurance. Go to vero.com.au for a copy or call us on 13 18 13. Target Market Determination also available. This advice has been prepared without taking into account your particular objectives, financial situations or needs, so you should consider whether it is appropriate for you before acting on it. Subject to any rights you may have under any law, we do not accept any legal responsibility for any loss or damage, including loss of business or profits or any other indirect loss, incurred as a result of reliance upon the information. Please make your own enquiries.
