HKUST Business School Magazine

Navigating the challenges So, while the integration of technology across the value chain has clear benefits, it also brings disruption and all kinds of new challenges. One of the most immediate now facing the whole industry is the adoption of AI and advanced analytics, and deciding where and how to implement them to best advantage. “AI is not going to slow down,” Cheung said. “If you look at the amount of people who are actually making use of AI, the amount of data that is available, I think that particular sector will grow at a pace which is unimaginable.” One key area where AI is already having an impact is in underwriting and risk assessment. Insurers are using the latest technologies to enhance various aspects of front- and back-end operations. For example, robo- advisors can now provide personalized recommendations for individual customers, as well as underwriting assistance that improves risk assessment. Shifting to high-touch, high-tech As a result, the digitization of distribution and customer engagement functions is becoming commonplace. Insurers can see that the use of AI plus further investment in online platforms and mobile apps are essential if they want to reach customers more effectively. This entails a shift to a “high-touch, high-tech” model which allows clients to research, compare and purchase policies with greater ease and convenience. However, insurers must also strike a balance because many customers will still want a human touch and in-person meetings, especially if they are considering complex or high-value products. “The relatively more educated and relatively younger generation, in particular people in their 30s or 40s are starting to do their own research and even investment analysis with the help of AI,” Cheung said, “But they also want to see an agent when it comes to making a final decision.” Being aware of the dark side With greater adoption of technology, the insurance industry is also aware of the challenges that come with possible unethical practices or what Cheung calls the “dark side” of AI. This might include increased instances of exclusion or discriminatory practices which single out individuals or certain groups, something which goes against the fundamental principle of insurance as a risk-sharing mechanism, and leads to unnecessary problems. Another area of concern is the possible lack of transparency and accountability. The use of complex AI models can make it difficult to understand how and why certain decisions are arrived at, and this lack of clarity can erode trust in the methods and outcomes. “We must not forget what we call unethical or illegal use of AI,” Cheung said. “There are examples of malicious AI as a service on some of these dark websites, providing tools for deceptive practices.” To guard against this, the industry needs to ensure data privacy and security by all possible means. “A robust data governance framework will be essential to leverage data and analytics effectively,” Cheung said. Biz@HKUST 14 Cover