KBRA: A robust governance framework is key to unlocking AI benefits for insurers

By Mia MacGregor

Feb 4 - (The Insurer) - AI offers insurers significant benefits, including greater efficiency, improved productivity and enhanced customer satisfaction, but a robust governance framework is required to manage the risks and opportunities during development, deployment and use, according to a recent report by rating agency KBRA.

The report, titled AI in Insurance: The Future Is Now, highlighted the benefits and potential risks of AI in the insurance sector.

Key areas where AI is making a significant impact include marketing, underwriting, claims processing and customer service, according to the report.

In marketing and distribution, AI can generate various forms of content, create personalised communications for policyholders and prospective customers, and streamline paperwork and certain decision-making functions, the report explained.

KBRA also noted that AI can help underwriters quickly analyse vast datasets, enabling more informed and personalised risk assessments.

It can also support claims processing through tools like computer vision technology to aid in visual data analysis related to claims, enhancing the speed, accuracy and fairness of the claims settlement process, according to KBRA.

The company noted that these kinds of outcomes could both improve customer satisfaction and, by reducing the length of the claims cycle, reduce costs for the insurer.

Additionally, KBRA stated that AI-driven pattern analysis can enhance the speed and effectiveness of fraud detection, improving efficiency, reducing costs for insurers and potentially lowering premiums for policyholders.

However, the report underscored the need for high-quality data, cohesive data strategies and robust governance frameworks.

KBRA noted that poor data quality, particularly in legacy systems, can undermine AI's potential benefits. Additionally, insurers face risks such as cybersecurity concerns, regulatory compliance challenges and the possibility of unintentional bias in AI-driven processes.

To mitigate these risks, KBRA recommended integrating AI governance into insurers' enterprise risk management frameworks.

Key strategies include creating multidisciplinary teams to oversee AI use, ensuring accountability and ongoing audits, and providing staff training to close skills gaps.

The report emphasised that continuous monitoring of AI systems is essential for maintaining compliance and protecting data privacy.

As AI adoption accelerates, KBRA warned that companies that fail to integrate it effectively risk falling behind their peers.