An actuary has warned that the reinsurance industry risks falling behind if it fails to grasp opportunities generated by new technologies such as artificial intelligence.
Tanya Beattie said that the sector had been “slow to adopt new technology and AI” and that more effort should be put into the area.
She warned, “If you don’t, you are going to fall behind.”
Beattie, of financial services firm Grant Thornton’s Bermuda office, was speaking at the major [Re]Connect reinsurance conference, held at The Ritz-Carlton hotel on Seven Mile Beach earlier this month.
The wholesale adoption of new technology presented risks, but “not engaging at all is an even bigger risk”, she told conference delegates.
She explained that a hi-tech approach to data analytics could offer “greater efficiencies within the business” and that the common view was that “the present systems are no longer fit for purpose”.
Beattie acknowledged that there might be a reluctance among reinsurance firms to spend on technology because it had, in the past, invested a lot in systems that had failed to live up to expectations.
“Legacy systems are still very much in use in the industry and they are not especially integrated with data-driven solutions,” she said.
She added, “AI literacy is still quite low. ChatGPT might be the limit for many.”
But, she said, climate change also had to be factored into decisions on AI because the data centres that house AI systems use “huge amounts of electricity, produce a lot of waste and consume huge amounts of water”.
Beattie added, “There is lots to consider there, but it’s safe to say AI is part of the future of the industry, but there have to be safeguards.”
She explained there would need to be “guard rails” around the technology and that “keeping humans in the loop” was vital.
Beattie advised reinsurance companies that wanted to increase the use of technology to start slowly and expand as they gained trust in the systems.
She was speaking at ‘Adapting to Change: Macro Trends Affecting the Reinsurance Landscape’, a panel discussion that also involved Veronika Torarp, a partner at financial services company PwC; Mark Yu, the head of enterprise capital strategy at New England Asset Management; and Tim Zawacki, principal research analyst with S&P Global Market Intelligence.
Yu said, “We are a firm believer in leveraging technology and analytics.”
Beattie added afterwards, “It’s cautious acceptance; that’s how I would put it.”
She added that technology could assist with many back office functions that would “free people to do other things”.
But Beattie warned, “The need to keep the human in the loop, that’s very important. If you look at underwriting, nothing is going to replace underwriting experience. It’s more support, but not replace.”