An Eye on AI: How the Human Element Plays a Role in Today’s Tech

Artificial intelligence is becoming an increasingly important tool for commercial insurers, but ethical concerns remain.

By: Raquel Moreno | April 9, 2022

Artificial intelligence has become an integral part of the day-to-day operations across most industries. And in great part, AI can be credited with condensing vast amounts of data into something more usable.

But as companies come under greater public scrutiny for how algorithms are influencing corporate behavior, the question of how to ethically apply artificial intelligence is top of mind for commercial insurance leaders.

Ethical use of technology is “not a problem that’s exclusive to AI,” Anthony Habayeb, founding CEO of Monitaur, an AI governance company, said.

“Corporations have their corporate governance and need to have their opinion of what sort of ethics and practices they bring into the market as a company. And those principles should be implemented in their AI, software and practices overall,” he explained.

What Determines the Ethical Use of AI?

Anthony Habayeb, founding CEO, Monitaur

The volume, selection and ownership of available data is causing the wider business community to reflect on the decision-making capacity of algorithms. “These AI systems are making decisions of great consequence,” Habayeb said.

“As a result, they feel like more addressable and governable ‘decision makers’ than just nebulous software. And that’s causing our use of the word ‘ethical,’ because we’re humanizing AI in a way we have not approached with other software.”

But concerns around AI’s autonomy need to be measured against the actual amount of data available in the insurance space, according to Tom Warden, chief science and insurance officer for CLARA Analytics.

Unlike the massive pipeline of data that companies like Google have access to, the insurance industry is still dealing with static data, to some degree, Warden said. “We don’t have a continuous stream of information on a claim or even a policy, so there’s just not enough data to really rely on the models themselves.”

Even as the data capacity of the insurance industry continues to expand, and companies rely more heavily upon models to automate decisions, “it’s important to remember that AI doesn’t really reason; algorithms have no ethics; they are just simply algorithms,” Warden said.

“You can’t really program a model to be ethical, but you can make sure that as it’s applied to the decisions that it’s being asked to influence, that the outcomes maintain the ethical standards of the various constituents,” Warden said.

Questions of ethical AI and digital privacy may feel weighty and philosophical, but Habayeb encouraged companies developing these new technologies to consider what their products are trying to accomplish and allow that to guide their practices.

“What is the brand promise that you’re making to the market, to the companies and the small business owners that you’re providing commercial coverage to?” Habayeb asked. “And then how do you effect those brand promises in your AI system?”

Quality Control

As more carriers, especially those with legacy systems, team up with Insurtechs to sharpen the story their data tells with machine learning and AI, regulators will have a greater role to play to encourage greater accountability.

Carriers will have to think through their entire data ecosystem to achieve comprehensive AI governance, including the Insurtech vendors with whom they partner.

“Whether or not a carrier is the ultimate developer of some algorithm or AI system, they will be accountable for the results of that system. It’s important carriers develop strategies and processes to achieve assurances that extend into their vendor ecosystem as well,” Habayeb added.

To support state regulators in the formation of their frameworks for AI, in 2020 the National Association of Insurance Commissioners (NAIC) released guiding principles on artificial intelligence “emphasizing the importance of accountability, compliance, transparency and safe, secure and robust outputs.”

Since then, calls have been made to establish national standards in the U.S. for “acceptable design and behavior of AI-enabled systems,” as well as a certification system to verify that AI-enabled systems are developed in accordance with said standards, according to a 2021 publication of the Journal of Insurance Regulation.

And at the close of 2021, the NAIC voted to form a new high-priority H Committee on innovation, cybersecurity and technology to address the insurance implications of emerging technologies, such as AI, and cybersecurity — with this being only the eighth committee of this level in the history of the NAIC.

External validation is not just for the sake of regulatory compliance. For Warden, AI and data science teams must be willing to be looked at by internal audit teams as well as external verifiers: “I’ve gone through that process in the past and it’s painful. But it’s necessary because you can uncover things that [are] slipping through the cracks.”

Take the Time to Be Thorough

Tom Warden, chief science and insurance officer, CLARA Analytics

Carriers and Insurtechs need not wait for AI regulations to dictate their accountability practices. For both Habayeb and Warden, continuously monitoring the output of algorithms should be standard protocol.

“There’s such a rush to develop and deploy in this space that many companies potentially are not paying as much attention to the ongoing monitoring of the of the model output that they need to,” Warden said. “Companies need well-documented processes for developing, testing and deploying AI.”

Documentation about how models are developed, and the checks and balances implemented throughout development, are essential to make sure they’re being built properly. “And that goes beyond just the ethical use of data,” Warden added.

Checks and balances provide a sense of assurance for insurers and insured alike. “As you think about the impact on people and insured parties, these models are going to have great impact. Those stakeholders would like to know that, when a model has made a decision about them, someone has checked it, someone’s tested it,” Habayeb said.

No Need to Overcomplicate Things

There is no need to reinvent the wheel when it comes to AI risk management. Carriers have corporate governance and risk principles in place.

“We should not overly complicate what AI is [so] that it feels unapproachable to humans,” Habayeb said.

“Instead, a connecting thread can be maintained, recognizing humans built this, humans should be testing this, and humans should be able to establish confidence in the applications’ safety, transparency, trustworthiness,” Habayeb added.

Giving too much credit to AI alone is risky. “Then we’re disconnecting the accountability from the people who built it,” Habayeb said. And people make mistakes in the products that they build all the time.

“I think that we have a tolerance for mistakes,” Habayeb said. “We don’t have a tolerance for negligence.” &

Raquel Moreno is a staff writer with Risk & Insurance. She can be reached at [email protected].

Sustainability in All Markets

David Guild, Head of Financial Lines, MSIG USA

When looking for a financial lines insurance partner, sustainability should be top of mind. Knowing that an insurer can provide solutions in a hard market alongside the soft will not only provide peace of mind but also help build resilience.

“Leaders should have the room to concentrate on their vision for the company and what it can achieve — not be burdened by potential risks that keep them awake at night. “Your insurance partners should be able to understand the trials and tribulations of running a business, to respect that there is no single right answer to most challenges, and be prepared to assist wherever, whenever issues may arise,” Guild said.

Sustainability is proven in an insurer’s ability to come through on the promises it makes. For example, MSIG USA’s approach has earned it an A+ rating, proof that its team can back the promises it makes and see them through to completion. “We are confident in our ability to serve your insurance needs, on a global scale,” Guild added.

“Everything we speak of revolves around the credibility of our platform, which is reflected in our A+ rating, a 350-year legacy within our family of companies, and our experienced team here in the U.S.”

An Emphasis on Company and Culture

Successful partnerships are built on a solid relationship between insurer and client.

At MSIG USA, “we aim to be a stable and sustainable presence for our clients,” Guild said. “The value of long-term relationships is at the core of what MSIG USA is all about. Our underwriters deeply appreciate the importance of these connections.

“We believe that building and maintaining strong, long-lasting relationships with our customers is essential to navigating the inevitable fluctuations of the insurance market. We are confident in our abilities, and in yours.” he added.

Company culture, as Guild mentioned, is more than an internal commitment; it’s something that can also drive business relationships.

For insurance partners, analyzing and aligning with their clients’ culture helps to solidify partnerships, as well as open the lines of communication and understanding.

“Variables will change, oftentimes rapidly. From our view, what matters is the culture of that company when responding to change. It’s about trusting their character rather than just the policies and procedures in place,” Guild said.

A Source of Truth and Clear Communication

Effective communication goes a long way in clearly understanding an insured’s business and future potential. This allows for sustainable partners to develop coverage that fits and to work closely with their Claims team to understand the partnership in context.

With the amount of data available today, and the number of ways information can quickly be disseminated through different medium, a good insurance partner knows that companies must be the single source of truth for their stakeholders.

“Quarterly and annual earnings calls provide a platform to discuss financial results and respond to investor questions. Investor presentations offer a more comprehensive overview of the company’s strategy, performance and outlook,” Guild explained.

We will look at what analysts and other third parties think about the information provided to try to glean what the investor base will think and how they will act. But ultimately, it is what the company says, and the way they say it, that we will assist in defending, if need be, and so we make sure to listen and learn from the company leadership.

Bringing These Qualities Under One Roof

Leaders want to know that, at the end of the day, their business is a priority for their partners.

Clear communication, a strong relationship and emphasis on sustainability are just the start. Their insurance partners should strive to understand their business, identify areas of concern and craft coverage customized to meet their needs.

With an impressive 350-year legacy, MSIG USA is doing just that for its clients, utilizing its global presence to further its clients’ goals.

“The key elements of our approach are an intellectual pursuit of information, a well-honed practice of underwriting that identifies material aspects for risk assessment, and clear communication of our insights to our clients: brokers and buyers alike. We aim to provide a transparent and informed perspective on the risks we underwrite,” Guild said.

“We bring sustainable, predictable insurance capital and what we believe is best in class service philosophy, honed by working with some of the most sophisticated brokers and buyers of insurance in the world.”

To learn more, visit: https://www.msigusa.com/financial-lines/.

This article was produced by the R&I Brand Studio, a unit of the advertising department of Risk & Insurance, in collaboration with MSIG USA. The editorial staff of Risk & Insurance had no role in its preparation.

MSIG North America is a member of MS&AD Insurance Group Holdings, Inc. which is the 8th largest non-life insurance group in the world by revenue. Based in Tokyo, Japan, we operate in 48 countries/regions and generated $46B in 2021 with approximately 40,000 employees globally. MSIG North America is the marketing name used to refer to MSIG Holdings (U.S.A.), Inc. (“MSIGH”), and its subsidiary companies.