This article was created in partnership with Munich Re.
The one term that has come to define 2025 is most definitely ‘artificial intelligence’. AI has found a place in almost every aspect of business operations from HR to client management, branding to payroll. In the insurance space, firms are constantly weighing the benefits and the challenges that AI is offering up, looking at how the technology can be adopted safely, ethically, and efficiently.
Data from McKinsey & Company found that AI has had a measurable impact on parts of insurance businesses, such as a 10-20% improvement in new-agent success rates and a 10%-15% increase in premium growth.
Specifically in the cyber insurance space, underwriters are challenged with an ever-evolving new risk landscape. At Munich Re Specialty, Bryan Barrett - regional underwriting manager, cyber - told Insurance Business that his team is actively seeing risks developing and using this technology, and he questions if the Industry is doing enough to properly underwrite these risks and thoroughly understand the exposures associated with this technology.
“AI is evolving every day,” said Barrett. “[As such], trying to keep on top of what technology companies are creating is challenging. But, more importantly, understanding how the AI was created is important here - because what it does and how it's trained could have serious consequences for organizations as well as users.”
The sheer number of opportunities that AI presents businesses is matched only by the unanswered questions CISO’s have around securing AI technology.
“When AI is implemented, it usually has a lot of touch points within an organization, which can then open security issues or exploits,” he said. “[For leaders, they] need to ensure that they’re closing those gaps. Also, from an underwriting perspective, trying to obtain that information from applicants or from insureds is a challenge because it’s proprietary - it’s confidential to them. It’s their “secret sauce” to what potentially is going to drive revenue or enhance productivity within the organization.”
As AI continues to rise in popularity, AI governance is struggling to keep pace. However, as Barrett told IB, developing AI governance is essential for organizations from both a litigation and regulatory perspective.
“There have already been lawsuits relating to discrimination and bias, Intellectual Property Infringement, and Data Privacy Violations from the development and usage of AI,” he said.
From the perspective of IP and data privacy exposure, Barrett explained that organizations should have a strong AI governance board that consist of individuals that have relevant experience. From there, they can develop a framework that will consist of policies, procedures, training, education, testing, and security to ensure that the implementation, usage, and output of AI is undertaken in a responsible, safe, and ethical manner.
“It all comes back to the training of the AI,” Barrett told IB. “Because once you’ve created the AI, you need to make sure that you are training it properly - looking at how it’s performing before it goes live to ensure that it's doing what it's supposed to do. And this is a constant process.”
Barrett likens AI to a toddler - a child in the first stages of infancy soaking up all the knowledge around them. A good parent guides the child, helps them build the right kind of skills, and monitors their progress.
“AI is like a child - constantly learning but not always processing that learning as expected,” he said. “As it grows it could become an all-in-one solution for organizations, but it’s not there yet.”
While AI is learning, there are still openings for it to make mistakes - which is why that human touch is vital.
“The pitfalls of AI surround the governance, training, and education of the models themselves,” explained Barrett, “because they’re only as good as they're trained to be. If they're trained in an ethical and safe manner, then they’re better situated to be used in a lot more situations. If organizations train their models with data lacking proper permissions or licensing, it can lead to significant legal consequences such as infringement claims or reputational damage.”
The overall goal for AI is to make our lives easier and to make organizations more efficient. For example, in the insurance space, Barrett sees the tech being extremely useful in underwriting risk, adjusting claims, actuarial analysis, policy administration, operational tasks, and enhancing the overall customer experience. While in manufacturing, AI assists in managing operational tasks such as inventory, time and materials - looking at and adjusting schedules to see what’s needed now and potentially in the future.”
At the heart of all AI risk advice remains one core concept - having the right training, education, and policies in place to not only ensure that your AI thrives but also to adhere to ethical business practices and ward off any legal issues down the line. At Munich Re Specialty, they help organizations achieve this through strategic partnerships and top-notch collaborations.
“Our best collaboration is through the use of our Reflex Cyber Risk ManagementTM program,” added Barrett. “When you buy a policy from our group, we provide complementary, confidential services that allow clients to obtain cybersecurity training, legal and technology consulting, risk surface monitoring, education, and tabletop exercises just to list a few. As AI continues to grow and evolve, so will our services to meet the challenges of new exposures and help clients mitigate their risk.”
At the end of the day, AI isn't going anywhere. As Barrett told IB, the tech is going to be forever with us in one way, shape, or form.
“AI will continue to ‘think’ and be more autonomous over the years,” he said. “It’s going to evolve, to get better, but I also think there'll be some growing pains, too. Organizations need to be cautious, because AI is not perfect, and governance is absolutely crucial.”
Learn how Munich Re Specialty is crafting tailored solutions and turning challenging AI and cyber risks into a competitive advantage for wholesale and retail broker partners: https://www.munichre.com/specialty/north-america/en/solutions/cyber.html
The views and opinions expressed in this article are those of the author and do not necessarily reflect the views of Munich Re or its affiliates.
