AI tools outperform humans in a wide variety of tasks, and as widespread adoption across all industries spreads exponentially, there could be many human casualties in this technological revolution.
Earlier this year, the UK’s Institute for Public Policy Research (IPPR) noted that an estimated eight million UK jobs could be wiped out by AI in what some are calling a “jobs apocalypse”.
The report warned that entry-level, part-time, and administrative jobs across all industries are particularly vulnerable to being replaced by AI in a “worst-case scenario” over the next three to five years as new technologies are rapidly adopted.
The IPPR’s analysis of 22,000 tasks across the economy found that 11% of tasks currently performed by workers are at risk of being automated. However, this figure could soar to 59% as AI becomes more capable of handling complex processes.
The think tank, which concentrated on the UK market, warned that industry is at a critical juncture, as more companies begin to use generative AI — capable of reading and creating text, data, and software code — to automate everyday tasks. While the initial wave of AI adoption is already threatening jobs, a second wave could lead to even more widespread automation as AI technology advances.
Are insurance industry jobs next in the firing line?
Many people believe they are – and insecurities are running high. As one disgruntled Reddit user recently stated: “Executives will roll out AI they claim will take over aspects of the claims process and use it as an excuse to under-staff the department with poorly trained and poorly paid workers that basically act as CSR’s. The AI will suck and adjusters will be left overworked and throwing money at people to try to keep up with work. Premiums will skyrocket. Executives will call it a success.”
But is such panic justified?
If Klarna is an example of the shape of things to come for all industries, it’s cold comfort. Thankfully, it’s not that simple. As per the nature of the business, Klarna, like many fintechs, has the kind of transactional model that allows for higher automation, and its comparatively limited line of products can be managed effectively from a customer perspective via the latest AI chatbots.
The insurance industry is a very different beast. A vast array of product types and solutions are handled by one insurer, while claims might be underwritten by another. Personalisation of those solutions, combined with complex policies that most customers struggle to wade through when it comes to claim time, may well mean that humans will always be a necessary element of the business, regardless of the advancement of technology.
“It will be a mistake to believe that generative AI will not affect jobs,” confirms René Schoenauer, Director of EMEA Product Marketing at Guidewire – the cloud-based platform that offers a variety of products and services for the P&C insurance industry.
However, he says, AI will also open up new opportunities to reskill and upskill for insurance workers. “The industry has struggled to recruit talent, so AI can be used to assist workers to overcome that shortage. It can act as a co-pilot with workers to assist them on complex insurance claims and decision making.”
Human-centricity and the insurance business
Schoenauer makes the point that insurance is, at its core, “a very human-centric business and customers want to deal with human beings when it matters most.”
He also references Guidewire’s own commissioned research on the subject carried out this year, which found that over half (53%) of UK customers were uncomfortable with the idea of AI making decisions about the value of their claim without human intervention.
“Yes, AI will pay a greater role in informing these decisions – whether that is through analysis of flood or wildfire damage, or by analysing photos of a car accident and then auto-booking the repairs – but it is not going to take away the human-to-human communication and empathy that people need when they are facing major events in their lives,” Schoenauer states.
Joshua Wöhle, the CEO and Co-Founder of Mindstone, a skill-enhancement platform designed to close the gap between the potential of AI and its real-world applications, agrees with Schoenauer. He says: “If we’re being extremely rational about it, the insurance industry is about taking risks from one place and putting that risk somewhere else, with a bunch of people facilitating that process in between. As AI becomes more capable, we’ll likely see a shift in how that process is managed.”
He continues: The industry will probably get more creative. People will hopefully be able to look at other parts of the risk market that are currently not being serviced… It’s not just about insuring your fridge or your phone. At some point, you might want to insure your lifetime earnings in a way that’s accessible to everyone in the world. There’ll be parts that will lead the insurance industry into a higher value-add profession, and others will have to move to other industries.”
Slow and steady wins the AI race?
One of the saving graces of the insurance industry in this transitional era, could well be its resistance to change. It’s a space that has been consistently criticised for its slow adoption of new technologies because of its risk-averse nature.
But that very characteristic could mean a much more circumspect and thorough adoption process, which would potentially minimise job losses because it would give the industry time to adapt and diversify, says Gary Ross, Founder and CEO of the startup insurtech blip – a company that is harnessing AI to pioneer a fully digital profit-share insurance model for small businesses.
“…decisions made by AI will need to be peer reviewed, and the effect on human capital will not be noticeable in the short term”
Gary Ross, Founder & CEO of blip
He says we won’t see serious job culls in the immediate future. “The insurance industry has historically been slow to adopt new technologies, and while AI will undoubtedly be integrated due to its potential benefits, this transition will be gradual and carefully managed. The conservative nature of the industry means that AI implementations will undergo significant oversight to ensure they meet regulatory standards.”
Ross goes on to say that the current abilities of AI are not at a stage where human input can be set aside. He explains: “The issue with AI is that, in most cases, it only gives reasonable conclusions. An AI software’s decision-making process, by design, is like a black box. It is almost impossible to validate every potential output with a limited number of inputs. It is trained with limited human intervention. This does not sit well with conservative insurers, meaning that decisions made by AI will need to be peer reviewed, and the effect on human capital will not be noticeable in the short term.”
“AI will transform the way we work by prioritising human cognitive capabilities,” says Ibrahim Gokcen, Chief Data and Analytics Officer at Aon in the newly released report: Evolving Technologies Are Driving Firms to Harness Opportunities and Defend Against Threat..
However, this transformation presents challenges, particularly the need for extensive training initiatives and according to the report, nearly 44% of CEOs believe their workforce will need to acquire new skills to navigate AI-driven business landscapes.
AI also promises to optimise the cost and efficiency of health plans, making them more competitive. Enhanced benefits can improve workforce well-being and bolster an organisation’s employee value proposition — the combination of benefits offered to attract and retain talent — while helping reduce stress and burnout.
Diversification of talent and skills imperative for insurance industry
Management of AI adoption and its potential long-term benefits is a critical juncture for insurers, says Rory Yates, Chief Strategy Officer for EIS, who refuses to underplay the fear that extensive job losses are “most people’s deepest and frankly, most sensible concern.”
However, he says the biggest risk is the application of industrial mindsets and negative business cases, and states: “The best people often seem to hope for is to minimise costs in insurance.”
He believes the problem with applying a negative business case, even with early AI tools and automation, is two-fold. Firstly, it doesn’t encapsulate all the value potential, i.e. personalising more, mitigating risks, explaining insurance and coverage better. And secondly, it merely makes the case that less human intervention equals less cost, which then becomes the ‘overriding objective.’
“The reality is that the best mindset is the aim to free human capital. Taking away the more meaningless, onerous and frankly distracting tasks from the humans and instead allowing them to focus on things they’re good at, and frankly need to be front and centre of – principally those things that require human-based empathy,” Yates states.
New human roles emerging as AI encroaches
But what skills should the human workforce of the future be focussing on in this ‘brave new AI-driven world’?
Schoenauer references the recent introduction of the EU AI Act on 1 August 2024, which has placed tighter regulatory measures on uses of AI, especially those in higher risk categories. “In addition to this, more cyber security experts and robust security measures are needed as these technologies bring a greater risk of cyber threats. Even as the use of AI expands in the insurance industry, customer experience managers are still needed to oversee the customer journey and handle the more complex cases and provide personalised services. Human to human interactions are second to none in the insurance industry.”
“Even as the use of AI expands in the insurance industry, customer experience managers are still needed to oversee the customer journey and handle the more complex cases and provide personalised services. Human to human interactions are second to none in the insurance industry.”
René Schoenauer, Director of EMEA Product Marketing at Guidewire
Interestingly, Guidewire’s 2024 customer attitudes study also found that 47% of young people aged 18-24, see the insurance industry as an excellent career option. Schoenauer explains: “Positively, a strong majority (70%) of those that use AI every day think that insurance is an exciting and innovative industry to work in, and 49% of those who use AI once to a few times a week believe the same. This is only good news for insurers as they try to build and retain their talent pool.”
He continues: “Further, roles to oversee operations and AI are necessary, especially to ensure that this technology is working in accordance with local, national and international regulations. 1 August 2024 saw the introduction of the EU AI Act which sets out a robust framework for how AI systems should be safeguarded in a number of categories from prohibited risk to those that pose minimal risk.
“As the insurance industry holds a lot of private information, it falls into higher risk categories, so these AI systems require much more stringent regulatory requirements to comply with the act. For example, detailed documentation of the AI system must be held, including being able to explain the AI’s decision making process and ensuring accountability.”
James Bent, VP Solutions Engineering for Virtuoso, agrees, saying: “AI is particularly good at data processing and data analytics in insurance. So when more data can be processed and analysed, then human intervention can make informed decisions as a result. Data analysis and decision making will remain firmly in the human realm, but powered by AI.”
Bent notes that this isn’t a picture we will see in the immediate future though. He says: “This year the most common application of AI is chatbots, which are not core business systems and processes. We are far from AI taking over the core running of businesses. So even those companies that do trim in admin will be replaced with more decision-making and actionable roles.”
When viewed in this context it seems likely that the widespread adoption of generative AI is likely to only benefit the insurance industry.
“This year the most common application of AI is chatbots, which are not core business systems and processes. We are far from AI taking over the core running of businesses.”
James Bent, VP Solutions Engineering for Virtuoso
Yates points out that diversification is already happening across the industry. He says: “AI is already creating a human skill deficit from Prompt Engineers through to people who are learning news tools. So there are more new roles coming into play all of the time. Because “accountability” in insurance will always sit with the organisation and the people within it, we simply won’t be able to replace people. Especially in managing through the transition period as people with new skills are ‘onboarded’ into the organisation.”
He also believes that regulatory changes will protect human jobs because compliance requires human rather than machine decision-makers. “In particular in highly regulated and compliance-based organisations AI will have to operate with humans in the loop and humans in control at all times. We are already seeing class actions being taken against insurers in the US. We have increased lines of accountability in the UK under the FCA and DORA landing in the EU. So this is set to intensify.”
AI-driven insurance and changes to the industry
If workforces shrink and AI drives profitability forwards, we could see a complete reshaping of the industry as we know it: a mushrooming of smaller companies with razor-sharp processes on core AI platforms that offer personalised and fast services, will become the norm – or even the leaders, perhaps? An example of this is Lemonade – the all-digital, AI driven insurtech that recently hit the headlines following a two-second claims settlement and recently revealed that it is now on its path to profitability.
Roi Amir, CEO of Sprout.ai points out that, “AI-driven processes are often more scalable than human-driven ones. This means that small startups can quickly expand their operations and compete with larger, established firms. We are already seeing some companies setting an example this way and this will only increase competition. This also means that businesses will need to keep a close eye on how AI is being used by both startups and competitor companies to see what they may need to do to remain competitive.”
“…customers still value human expertise and communication when it comes to more complex scenarios, such as medical claims, for which the option of that support must be reserved. If anything, the issue of skills is one of recalibration, not whole change.”
Roi Amir, CEO of Sprout.ai
Amir concludes: “Different business cases are going to need different levels of input from AI compared to what people can do. There may be cases in which a fully automated process will be more appropriate, like small claims where consumers’ ultimate priority is speed.
“But customers still value human expertise and communication when it comes to more complex scenarios, such as medical claims, for which the option of that support must be reserved. If anything, the issue of skills is one of recalibration, not whole change. At a basic level, analytical skills and understanding of AI outputs will become more critical to ensure all employees can interpret and act on the insights being provided by new AI-driven tools.”
Yates notes that there are many hurdles to be overcome before such a scenario could unfold – especially given the regulatory minefield of the insurance industry.
“There’s a distinct possibility that some [companies] will fall short of applying AI responsibly, and instead apply it to the idea of saving money through shedding people. Those will be the ones that simply write negative business cases that involve trading off the cost of people vs. the cost of GenAI,” he says.
“Interestingly, at this stage most cases don’t immediately stack up with GenAI applied and controlled to decent standards. This typically costs a lot more than many would imagine. Instead, we are seeing insurers opt to create far more value, and use GenAI to help create even more powerful human moments, not less.”
He also believes that although human related costs might be reduced through AI applications, other expenses must be considered – especially those connected with environmental concerns. “Many are avoiding the environmental challenges of Generative AI. Highly energy consumptive, this will be called into question very soon. I’d urge a lot of insurers who have been making claims of carbon neutral plans to think very hard about this. There are answers, but again responsibility must be taken by the insurers.”
AI and the insurance industry of the future
Could the use of AI lead to a market filled with more efficient, but less human-heavy companies?
“I don’t think it will be more competitive by being less human heavy,” says Yates.
“I think it will power more competitive markets by making them more dynamic. Increasing our knowledge of customers whilst increasing our ability to act on this knowledge is the new emergent competitive paradigm. In this regard, AI is like aviation fuel thrown on to this bonfire.
“We need AI to make us more human. AI will make insurance more competitive because it will create more intimacy between insurers and insureds. This new battleground becomes customer-led not price-led, and I for one am here for that!”
Humans will always have a part to play in the insurance industry, even with the ever growing use of AI, asserts Schoenauer. “Yes, the role of humans is likely to change, but it provides a number of opportunities to reskill and upskill to fit in this new industry landscape. Customer relationship management will always be a necessary role for humans to play, especially in the face of solving more complex cases and those needing empathy and to build all important rapport with customers.”
He adds: “AI is not a threat to the insurance industry. It is an opportunity for ethical innovation and upskilling of the workforce.”
Editor’s note: With thanks to our contributors René Schoenauer, Director of EMEA Product Marketing at Guidewire, Joshua Wöhle, CEO and Co-Founder of Mindstone, James Bent, VP Solutions Engineering for Virtuoso, Gary Ross, Founder and CEO of blip, Rory Yates, Chief Strategy Officer for EIS and Roi Amir, CEO of Sprout.ai
Report by Joanna England
Joanna England is the Editor-in-Chief for Insurtech Insights, the leading online platform for insurtech and insurance industry news, insights, and events. With over 25 years of journalism experience, she has worked for both consumer and business publications, covering a wide range of topics from finance, technology, lifestyle, to health and culture.
