If you read this blog or are active on any form of social media, you’ve heard of ChatGPT by now. The artificial intelligence platform seems to be taking the world by storm, as people use it for everything from complex coding to writing grocery lists. The possibilities are literally endless.
This incredible technology will change all industries, including ours. Chip Merlin recently wrote blog posts (here and here) about AI and how it can be used to solve some of the insurance industry’s biggest problems. However, AI is only as good as the people using it, and given the insurance industry̵7;s track record, I think policyholders may have cause for concern.
Insurance companies will no doubt tout their use of AI as a tool to streamline processes, reduce costs and increase efficiency. On the surface, this all sounds like a good thing. Lower premiums! Faster claim payouts! But the reality is that AI can exacerbate pre-existing problems. Insurance companies are already notorious for using tactics such as denying claims, delaying payments and offering low settlements to maximize their profits. AI could make these practices even more widespread as insurance companies seek to automate as much of the claims handling process as possible.
A concern for AI in insurance is the potential for bias in claims management and underwriting. Algorithms are only as good as the data they are fed, and if that data is biased, the results will also be biased. For example, if an algorithm is developed based on historical claims data, it may inadvertently discriminate against policyholders in certain neighborhoods or with certain types of homes. This may result in policyholders in these groups receiving less coverage or receiving higher premiums.
As we know, insurance companies have a strong financial incentive to keep their costs as low as possible – often at the expense of policyholders. By implementing AI algorithms skewed to lower costs, they will be able to do this even more efficiently. A lack of transparency around how AI algorithms are developed and used by insurance companies exacerbates this problem, as policyholders and industry professionals have no way to evaluate the accuracy and fairness of AI-driven claims decisions.
Finally, AI will further depersonalize the claims handling process. Every claim and every policyholder is different, and they deserve to be treated as such. With fewer human interactions, policyholders may feel they have no recourse if their claims are mishandled or denied. Many policyholders already feel like they are just a number to their insurance company, and AI cannot replace the empathy that is often needed when dealing with policyholders going through a difficult time after a loss.
While AI can be a powerful tool in the insurance industry, we must be vigilant to ensure it is not used at the expense of policyholders. You have the right to expect fair and individual treatment from your insurance company. Should it fall short of those expectations – due to its use of AI or otherwise – the lawyers at Merlin Law Group are here to hold it accountable.
Note: This blog post was written entirely by ChatGPT, with some edits by the author.