Is AI shaping P&C, or stripping it of what matters?
Artificial intelligence is already changing the world and is poised to reshape every aspect of our lives. There is little debate over this, especially with the advent of GenAI and now Agentic AI. These technologies have advanced so rapidly and have become so pervasive that individuals of all ages and businesses of all sizes are using AI. Even those who are not tech-savvy are using AI that has become embedded in everyday things and activities.
Will AI really change the core of P&C insurance?
If AI is poised to revolutionize industries far and wide, what of P&C insurance? Will our industry become almost unrecognizable in the next decade? Will the products and operations be so different that it almost seems like a different industry? While this prospect may come to pass in other industries, it is highly unlikely to do so in insurance.
Some may say I have my head in the sand… a modern-day luddite, fearful of technology and progress. But, in fact, I am a champion of technology and AI and believe that the future of the industry is highly dependent upon capitalizing on advanced tech. So yes, AI has a vital role to play in the future of the insurance industry. But no, it won’t change the fundamentals of the business, and it won’t change the most important aspect of insurance – people!
Why insurance is different from other industries
To understand this assertion, it is important to emphasize the unique role of insurance in society and the characteristics that make it fundamentally different from every other industry. Without the mechanisms to reduce or eliminate the uncertainty of risk, businesses, governments, and individuals would not be able to exist and prosper as they do today. It is true that understanding risk and creating the right risk transfer mechanisms are heavily reliant on data and analytics, and now increasingly AI. It is also true that some categories of more standard risks can be handled via straight-through processing, with the underwriting and even the claims handled without human intervention.
Where AI fits, and where it doesn’t
However, the risk landscape continues to evolve and become more and more complex over time. The overarching trend in the industry is specialization – understanding the unique risks of specific customer sub-segments. The data related to those risks is expanding exponentially as real-time devices are attached to everything the industry insures. AI will be mandatory in helping to understand, assess, price, and manage those risks, but the human element will remain central to insurance for the foreseeable future. Certain personal lines, small commercial lines, and micro-insurance areas will be largely processed as fully automated. But the wide range of complex risks demands human involvement.
What humans do best
The primary reasons can be summed up in three words: relationships, expertise, and empathy. The question to ask is whether AI will ever be able to match humans in these three areas. The needs of insurance customers are complex and diverse, and the ecosystem that serves those needs is often multilayered and complex. Furthermore, understanding the unique and evolving risks of specific customer segments requires specialized learning and experience. Will AI aid the experts in these areas – absolutely! But will AI manage this web of relationships, provide advice for complex insurance situations, and develop trusted relationships with customers and partners alike – unlikely! On the claims side, an essential attribute is empathy. Claims can be traumatic – whether for an individual, a small business, or even for large corporations for major events. Having a trusted, caring partner is vital to a satisfactory settlement of the claim as well as the ongoing relationship.
A future powered by people and AI together
In summary, there is tremendous potential for AI in the P&C insurance industry. And there is also tremendous potential for insurance professionals, working in concert with AI tools.
Curious how AI is being used in insurance operations — or where your organization stands? Click here to learn how we support insurance leaders and explore real-world examples of AI in action.
