Insurance will be in higher demand as businesses incorporating AI and robotics into their systems and processes will require adequate protection from a wide range of associated risks, stated two new reports commissioned by Lloyd's in collaboration with the University of Surrey. At the same time, the reports also discussed how insurers should look to exploit the potential benefits that AI and robotics can offer while being aware of the risks associated with such technologies.

Commenting on these reports, Lloyd's head of innovation Trevor Maynard said, “Our world is becoming increasingly automated. Insurers have an opportunity to play a role in shaping the development of the AI and robotics and will no doubt be instrumental in providing solutions to some of the most complex risks associated with these technologies. Some of these risks have been well documented, however for insurers to respond appropriately, it is important that the benefits and opportunities of AI and robotics are properly understood.”

AI could impact several lines of businesses such as product recall and liability, third-party motor liability, professional indemnity, medical malpractice, cyber, fidelity and political risks. This is where insurers can step in to fill the gaps, according to the first Lloyd’s report titled ‘Taking control: artificial intelligence and insurance’.

Areas of opportunities for insurers include:

• any company generally offering algorithm-based systems to data-rich companies (e.g. fraud detection in online sales) which possibly needs to be insured against the risk of the algorithms returning incorrect decisions and its impact on the AI companies’ clients
• new companies emerging in the disinformation defence area who would require certain type and form of products (e.g. professional indemnity and cyber products) as they leverage technology to filter out fake news, detect and eliminate troll-bots as well as certify information and authenticity of images and videos
• increasing demand for AI knowledge experts who are able to provide risk management services as the AI field develops and applications increase. This has led to specialist service firms emerging that are aimed at loss prevention.
• acquiring the knowledge needed to provide insured parties with guidance on AI best practices by assuming a leadership role in this space and thereby shaping the development of the AI ecosystem in which they operate

Meanwhile, 'collaborative robots' (or cobots) are threatening to significantly change the risk landscape in many sectors of the economy, according to Lloyd’s second report titled ‘Taking control: robots and risk’. The report also found that adoption of robotics could be speeded up by insurance as it could help address health and safety concerns.

In fact, various predictions have stated that millions of jobs could be taken over by these increasingly sophisticated robots which definitely has significant risks implications for the insurance industry. For example, the adoption of cobots in factories could result in new risks to human co-workers, cyber-attacks and faults resulting in large business interruption and property losses as well as potential leaks of intellectual property.

However, there is also an opportunity for insurers to collaborate with clients since data from cobots will provide greater understanding of risk and offers opportunities for improved risks and pricing models.