Global law firm Kennedys has highlighted potential benefits and risk to the insurance market from the use of artificial intelligence (AI).

Among the risks, it warns, is that of AI-generated deepfake images being offered as evidence in support of a fraudulent claim.

In its Global Forecast 2024: Evolving Insurance Risks report, the firm also identifies ‘deglobalisation’ – due to a fragile geopolitical landscape – and bio-diversity loss as issues that insurers will increasingly have to tackle.

Kennedys says that environmental, social and governance (ESG), developing technologies, geopolitics, and claims inflation all remain top concerns for the sector.

“The risks examined in previous reports within these themes – such as supply-chain disruption, climate change and cyber breaches – are all still firmly in place, but alongside these, the risks have evolved and diversified,” the report states.

AI benefits and risks

The firm says that the access to more and better-quality data provided by AI translates to improved risk-assessment for underwriting, allowing customised pricing and coverage. It adds that AI can also help to manage the claims process, allowing insurers to pay claims more quickly.

It identifies three categories of AI risks, however:

• Failure of AI – both human failure and technology failure,
• Malicious use of AI by third parties, and
• Issues with data.

Kennedys points out that the potential harms from AI “do not neatly fit into existing insurance lines”.

It highlights claims arising out of the performance of AI in an unexpected manner, such as deepfake fraud, a cleaning robot causing a flood or fire, or an accident involving a self-driving car.

Differing priorities

Kennedys partners from various countries identified different priorities, with the shifting regulatory landscape the biggest concern in Britain, while automation and AI were the main concerns in North America.

Europe, the Middle East, Africa and Latin America all identified climate change as the biggest challenge for insurance, while in the Asia-Pacific, cyber-attacks were a bigger worry.

John Bruce (partner, Kennedys) said: “The global risk environment in which the insurance sector operates has always reacted and adapted to new and emerging risks. What is evident from our report is that the pace of change is quickening.

“We do not exempt ourselves from this challenge – insurers and insureds expect their lawyers to anticipate new risks and advise on how to cope with them,” he added.