Insurers warn of reputational and regulatory risks

As insurance companies increasingly integrate artificial intelligence (AI) into their operations, information technology experts have raised concerns about reputational and regulatory risks.

While they agree that AI promises to increase efficiency, improve customer experiences, and streamline claims processing, it also presents significant challenges.

Information and Communications Technology (ICT) expert David Ofori-Atta said organizations must ensure accurate and reliable data before building AI models to avoid reputational and regulatory risks.

Speaking on the topic “Shaping the Future of the Insurance Industry: Artificial Intelligence is the Way to Go” at the recently concluded 2024 Association of West African Insurance Companies (WAICA) Education Conference in Accra, Ghana, Ofori-Atta said leadership must define and prioritize AI goals. he said. Use cases to generate short-term returns and build momentum.

“Start with a clear understanding of existing capabilities across the six key pillars of AI maturity, supported by strong governance structures, then build governance with review mechanisms to monitor output reliability, flag concerns, and ensure agreed guidelines are adhered to.”

Ofori-Atta goes on to list eight things insurers need to do to leverage AI for business growth: Data Accuracy; Artificial Intelligence Goals and Use Cases; Talent Assessment; Governance and Review; Technology and Integration; Skills and Team Preparation; Risk Management and Communication.

Another expert, who did not want to be named at the conference, said insurance companies should avoid reputational bias and discrimination because artificial intelligence systems are only as good as the data they are trained on, and if this data is biased, it can lead to unfair results.

“For example, an AI model used to evaluate claims or set premiums could inadvertently discriminate against certain groups, potentially damaging the insurer’s reputation and sparking public backlash.”

The expert also talked about the lack of transparency, stating that artificial intelligence models, especially models based on deep learning, can be complex and difficult to explain.

“If an insurance company relies heavily on its AI system to make decisions without providing clear explanations to customers, it may face trust issues, which could lead to reputational damage.”

The expert on regulatory risks emphasizes compliance, noting that regulators are paying more attention to the use of AI as AI is increasingly incorporated into insurance practices.

“In many jurisdictions, insurers need to ensure that AI-driven decisions comply with existing laws, such as data privacy regulations and anti-discrimination laws. “If AI systems fail to meet these standards, insurers could face legal challenges and fines.”

In his presentation, Niyi Onifade, sector head of Heirs Insurance Group, called for the adoption of artificial intelligence to revolutionize insurance in West Africa.

While presenting his paper at the WAICA Conference, he highlighted the critical role that artificial intelligence can play in shaping the future of the insurance industry in West Africa.

In his presentation titled “Artificial Intelligence and the Future of Insurance in West Africa”, Onifade emphasized that insurance companies must adopt artificial intelligence to remain competitive and meet the demands of the modern consumer.

He explained how artificial intelligence is revolutionizing the insurance experience by automating processes such as claims management, improving risk assessments and providing personalized customer service.

“Artificial intelligence is not just an innovation; It is the gateway to new generation insurance. In our sub-region, West Africa, the insurance penetration rate is much lower. Artificial intelligence offers an unprecedented opportunity to reach more customers, reduce operational costs and improve customer experience. “Today’s insurance consumer is more digital than ever before and will continue to be digital in the future.”

“Our industry needs to increase digitalization to meet the needs of today and tomorrow,” he said.