Artificial intelligence, insurtech and crewless ships are technological advancements that pose opportunities and risks for businesses, including insurers and reinsurers.
Concepts that were once the realm of science fiction are now a reality, and they have been highlighted by XL Catlin in its second quarter Emerging Risks Report.
The company’s drive to stay engaged with the fast-developing sectors was underlined yesterday with the appointment of AI expert Ashish Umre to its internal disruption and innovation team Accelerate.
Mr Umre is the fifth member of the team that was formed in November to leverage commercial opportunities arising from new technologies.
AI is the foremost emerging risk identified in the Bermudian-based company’s latest report.
Increasingly cognitive AI computer systems are now able to perform tasks normally requiring human intelligence, including decision-making, visual perception and speech recognition and translation between languages.
AI presents the possibility for “operational regulatory and legal uncertainties” in many business, including for insurers and reinsurers, according to the report from XL Catlin’s Emerging Risk Task Force.
Most AI development has occurred without a regulatory environment, however, XL Catlin thinks it likely that privacy, ethical and legal standards necessary to clarify responsibility and liability will be addressed by regulators and governments in coming years.
Artificial intelligence systems are able to adjust and automatically adapt to changes based on learnt actions. But there are risks.
“As machine learning becomes more widely adopted across industries, it is possible that questions may arise when determining liability for the failure or vulnerability of an AI application,” the report noted.
Other areas of concern relate to intellectual property, cyber vulnerability and data privacy, and liability policies.
However, there is plenty of potential upside too.
“Companies embedding AI technology within their products and services will increasingly benefit from faster, smarter and more efficient delivery of these services or products,” according to the report.
“Automation also provides manufacturers, producers and suppliers with the opportunity to establish better processes to enhance a business’ overall production potential via reduced costs associated with inefficiencies.”
The utilisation of ‘big data’ generated from the internet of things, that is connected systems and devices, can power predictive analytics and provide increased knowledge and insight for strategic decisions.
And that goes for in house operations. For example, insurers can improve operations, leveraging real-time data to do a variety of tasks quicker and more efficiently, from making underwriting decisions to analysing patterns to detect fraud and to find new market opportunities.
Customers benefit through potentially lower transactional costs and higher value service through more powerful predictive modelling and deep learning.
XL Catlin’s Accelerate team works with the company’s business units to generate new commercial opportunities from technologies such as AI.
The appointment of Mr Umre this week has bolstered the team, which new consist of five innovation experts based in London and New York.
Mr Umre was previously the lead scientist of marketing data science and optimisation with British multinational retailer Tesco.
At XL Catlin he will develop the company’s participation AI projects with partner start-ups.
Vincent Branch, chief executive of Accelerate, said: “We view innovation and the use of technology as a real opportunity to better understand our clients’ business and provide new innovative solutions and services.
“Getting the right talent around the table is key to us achieving our goals and this has to be a mix of insurance industry talent and talent from outside the industry. With experience at Tesco and longstanding academic achievements across AI, cognitive/neuroscience and machine learning, as well as his ability to lead innovation projects, Ashish is a great addition to the team and XL Catlin.”
Accelerate is involved in a number of initiatives, including the DRIVEN consortium, led by driverless car developers Oxbotica, to create mobile autonomous systems.
“It’s a ground-breaking project to deploy a fleet of autonomous vehicles. It is helping us to truly understand, and find ways to understand and assess the emerging risks associated with this exciting leap forward in technology,” said Mr Branch.
“With the team further strengthened we are even better equipped to drive change for the industry and for our clients.”
In the Emerging Risks Report, insurance technology was a further area of disruption identified. Rating agencies see only limited disruption to the traditional insurance market in the short term.
The report noted: “Typically, insurtech start-ups are small and nimble, focused on a niche product or service. By partnering with established insurers, these start-ups can leverage the distribution channels and regulatory environments of the incumbents.
“Despite having little immediate impact on insurer ratings, rating agencies have noted that insurers and reinsurers that do not invest in ‘digitalisation and innovation’ in coming years will see an impact on their operating performance.”
The final area identified as presenting potential risks and opportunities, is autonomous shipping. The development of unmanned and fully autonomous vessels is generating interest in the marine industry. The ships at sea would be controlled by onshore crews, with an expected reduction in risks and costs associated with human error an crew on-board, and efficiency benefits.
However, the potential risks include seaworthiness rules and liability, and vulnerability to cyber-risks.