Pros and cons of AI implementation in Businesses
AI creates new risks, even as it brings benefits to businesses
The widespread implementation of Artificial Intelligence (AI) applications brings many advantages for businesses such as increased efficiencies, fewer repetitive tasks and better customer experiences. However, in the wrong hands, the potential threats could easily counterbalance the huge benefits, as AI is vulnerable to risks especially cyber.
In “The Rise of Artificial Intelligence: Future Outlook and Emerging Risks”, Allianz Global Corporate & Specialty (AGCS) identifies both the benefits and emerging risk concerns around the growing implementation of AI—also referred to as machine learning, it is essentially software that is able to think and learn like a human.
The report noted that AI applications today are basic or “weak”, exhibiting abilities in specific tasks such as driving a car or solving a puzzle. However, in future, “strong” AI applications will be capable of resolving difficult problems and executing more complex transactions. Its introduction will most likely be unprecedentedly disruptive to current business models,” said the report.
AI is beginning to find users in almost every industry, from chat bots which offer financial advice to helping doctors to diagnose cancer. The technology is used to power driverless cars, predict the weather, process financial transfers or to monitor and operate industrial machines. AI could double the annual economic growth rate in 12 developed economies by 2035, an Accenture report estimated.
But with these potential benefits come risks, especially cyber. AI-powered software could help to reduce cyber risk for companies by better detecting attacks, but could also increase it if malicious hackers are able to take control of systems, machines or vehicles. AI could enable more serious and more targeted cyber incidents to occur by lowering the cost of devising attacks. The same hacker attack – or programming error – could be replicated on numerous machines.
Vulnerability to malicious cyber-attacks or technical failure will increase, as will the potential for larger-scale disruptions and extraordinary financial losses as societies and economies become increasingly interconnected. Companies will also face new liability scenarios as responsibility for decision-making shifts from human to machine and manufacturer.
What insurers need to know
The report noted that insurers will have a crucial role to play in helping to minimise, manage and transfer emerging risks from AI applications. Traditional coverages will need to be adapted to protect consumers and businesses alike. Insurance will need to better address certain exposures to businesses such as cyber-attacks, business interruption, product recall and reputational damage. New liability insurance models will likely be adopted – in areas such as autonomous driving for example – increasing the pressure on manufacturers and software vendors and decreasing the strict liability of consumers.
The insurance industry has been an early adopter of machine learning as it deals with lots of data and repetitive processes. By boosting data analytics AI will also give insurers and their customers a much better understanding of their risks so that they can be more effectively reduced, while new insurance solutions could also be developed. For example, AI-powered analytics could help companies better understand cyber risks and improve security. At the same time the technology could assist insurers in identifying accumulations of cyber exposure. Last but not least, AI will change the way insurers interact with their customers, enabling 24/7 service.