Abstract
The insurance industry is being challenged by increased adoption of automated decision-making. AI advances could conceivably automate everything: marketing, customer service, underwriting and claims management alike. However, such automation challenges consumer trust, as there is considerable public and scholarly debate over the ‘black box’ character of many algorithms. Insurance being a business of trust, this suggests a dilemma. One suggested solution involves adopting algorithms in a transparent manner. This article reports a study of how Swedish insurers deal with this dilemma, based on (i) eight interviews with insurance professionals representing four companies with a joint market share of 45–50% of the Swedish property insurance market and (ii) a questionnaire answered by 71 professionals in a Swedish insurance company. The results show that while transparency is seen as potentially valuable, most Swedish insurers do not use it to gain a competitive advantage or identify clear limits to transparency and are not using AI extensively.
Introduction
The insurance industry faces challenges. According to an analysis by The Economist, “insurers face unprecedented competitive pressure owing to technological change” (The Economist 2017). The reason is simple: few substitutes to the product, steady fows of investment revenue and large customer bases have worked well. Until now, that is, when advances in automated decision-making suddenly ofer the prospects of automating everything: marketing, customer service, underwriting and claims management.
Future work Based on this article, and the issues identifed, there are many opportunities for future work. Notably, performing similar studies in the insurance industry in other countries, as well as in other industries altogether, might shed more light on how the dilemmas of transparency, trust and AI adoption look in these contexts.
As few of the respondents in the interviews felt comfortable talking about the implications of AI on transparency, further research ought to be done on what kind of transparency would be possible and necessary for insurance companies in the near future.
