It’s interesting. I have been at DRI’s 2024 Insurance Coverage and Practice Symposium all day, and much of the discussion is either directly about or tangentially related to the impact of artificial intelligence on insurance. To me, the consistent theme that underlies all of the discussion is the ability of AI tools to improve the industry’s ability to understand, interpret, manipulate and manage massive amounts of data (and also the risks of bad faith claims from doing so).
I was thinking about this because of this article, coincidentally also today, in the Guardian which shows that homeowners premium increases in various parts of the United States align consistently with the extent of that particular part of the country’s increased risk of loss from climate related events. Now I am not saying that this is due to AI or its use by the insurance industry – but the relationship between the two almost certainly is not an accident and by definition must be the result of ever more focused and skilled underwriting that is allowing homeowners insurers to link premiums to the specific risks of specific regions of the country, rather than simply spreading risks and premium increases randomly across large swaths of the United States. And those specific regional risks, it goes almost without saying although the article does so, are climate driven.
AI driven or not, this type of sophisticated underwriting is about having and applying a high level understanding of the data – something that AI tools should, eventually, only improve.