Experts in information technology have raised concerns about reputational and regulatory risks as insurance companies increasingly integrate artificial intelligence (AI) into their operations.
While they agree that AI promises to improve efficiency, enhance customer experiences, and streamline claims processing, it also brings significant challenges.
David Ofori-Atta, expert in Information and Communication Technology (ICT) said organisations must ensure accurate and reliable data before building AI models to avoid reputational and regulatory risks.
Speaking on the topic: “Shaping Insurance Industry’s Future: AI, The Way To Go,” at the recently concluded 2024 West African Insurance Companies Association (WAICA) Education Conference in Accra, Ghana, Ofori-Atta said leadership should define AI goals and prioritize use cases to generate short-term returns and build momentum.
“Begin with a clear understanding of current capabilities across six key pillars of AI maturity, supported by robust governance structures, then establish governance with review mechanisms to monitor output reliability, flag concerns, and ensure adherence to agreed guidelines.”
Ofori-Atta continuing listed eight things that insurers must do to take advantage of AI for business growth – Data Accuracy; AI Goals and Use Cases; Capability Assessment; Governance and Review; Technology and Integration; Skills and Team Readiness; Risk Management and Communication.
Another expert at the Conference who do not want his name mentioned said insurers must avoid reputational bias and discrimination because AI systems are only as good as the data they are trained on, and if this data is biased, it can lead to unfair outcomes.
“For example, an AI model used to assess claims or set premiums might inadvertently discriminate against certain groups, potentially damaging the insurer’s reputation and leading to public backlash.”
The expert also spoke about lack of transparency noting that AI models, particularly those based on deep learning, can be complex and difficult to explain.
“If an insurance company relies heavily on an AI system for decision-making without clear explanations for customers, it might face trust issues, leading to reputational damage.”
On regulatory risks, the expert emphasises on compliance, stating that as AI becomes more embedded in insurance practices, regulators are paying closer attention to its use.
“In many jurisdictions, insurers must 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.”
Niyi Onifade, sector head of Heirs Insurance Group, in his presentation called for the adoption of AI to revolutionise insurance in West Africa.
Delivering his paper at the WAICA Conference, he highlighted the critical role AI can play in shaping the future of the insurance sector in West Africa.
In Onifade’s presentation, titled “Artificial Intelligence and the Future of Insurance in West Africa,” he emphasised the need for insurance companies to embrace AI to stay competitive and meet the demands of the modern consumer.
He outlined how AI is revolutionising the insurance experience by automating processes such as claims management, enhancing risk assessments, and providing personalised customer service.
“AI is not just an innovation; it is the gateway to the next generation of insurance. In our sub-region, West Africa, the insurance penetration rate is much lower. AI offers an unprecedented opportunity to reach more customers, reduce operational costs, and enhance customer experience. The insurance consumer of today is more digital than before and will become digital in future.”
Our industry has to scale up on digitalisation to meet the needs of today and tomorrow,” he said.
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