Lack of regulation is hindering use of tech—including AI

The lack of regulation, unavailability of trusted data and the public perception of risk are the biggest barriers to the widespread uptake and insurability of new and evolving technologies in the insurance industry, according to a survey conducted earlier this year and published in March by the International Underwriting Association (IUA). The survey, ‘ IUA Research on Evolving Technology Risks’, was run among C-suite participants from 20 member companies, four of which were solely reinsurers.

Tom Hughes, secretary of the IUA’s Developing Technology Monitoring Group (DTMG), who discussed the latest survey in a video interview with Intelligentinsurer.com, said the findings revealed that the industry is “proactively” exploring and testing new risks and opportunities associated with emerging tech, but is facing some real challenges that are limiting its development and adoption.

“The regulatory framework currently in place is not sufficient for a broad range of technologies that we surveyed,” Hughes admitted. This includes autonomous vehicles and vessels, unmanned aerial vehicles, cryptocurrency, artificial intelligence (AI) and micro mobility.

“There is a challenge in a number of areas where the market is having to balance the expectations of regulators with the expectations of clients and the brokers acting on behalf of clients,” Hughes said.

“I imagine that regulators have a very similar challenge to the ones that are experienced by the market itself,” he added. “They are trying to keep abreast of the latest changes and ensure that regulation is appropriate and future-proof.”

In its report, the IUA emphasised that a balanced and proportional framework for new and evolving technologies is “vital” for insurers willing to provide coverage for them and for insureds to ensure its safe use.

“Regulation may also limit the impact of other obstacles on technology, as it can require greater consistency in trusted data, more appropriate infrastructure, and assist in building public trust in technology,” the authors highlighted.

Hughes believes that regulatory frameworks should be “flexible” and regularly reviewed to ensure they don’t hinder technology, instead allowing it to evolve and associated benefits to be realised. “That’s a very difficult balancing act,” he said.

Data needed

In addition to regulation, the survey identified that the second most common reason for insurers not providing coverage for emerging technologies was the lack of trusted data required for risk assessment, especially in respect of AI, internet of things (IoT), crypto and smart medical devices.

This finding was backed by Michael Brunero, head of tech, media and intellectual property at CFC Underwriting, a member of the IUA. He said: “The lack of historic data is definitely a challenge for the insurance industry dealing with emerging tech when it’s very much focused on historical performance and there’s no history.”

Brunero said technology by its nature is complex. Hence, truly understanding tech can prove to be difficult for insurers that are already dealing with plenty of other issues.

“Trying to understand these new areas, as well as there being no data available on them, becomes a monumental task.”

He added that on the flipside the insurance industry generally tries to find solutions to risks that often come with an opportunity, as technology continues to evolve and change the way we lead our lives.

“Tech is undeniable, it’s going to create efficiencies. We have to accept it to a degree,” he said.

The research showed that systemic risk remains a key focus point when considering new technology-based exposure, mainly in respect of IoT, AI, smart medical devices, automated vehicles and crypto.

“Systemic risk is part and parcel of technology,” Brunero said. “We're already seeing some of that single point of failure, systemic risk in insurance products in the market.”

“The trick for us as insurers is to be able to monitor very carefully and react quickly,” he concluded.