AI & machine learning potential untapped in actuarial and risk management, LMA finds

According to a recent survey by the Lloyd’s Market Association (LMA), the full potential of artificial intelligence (AI) and machine learning (ML) in actuarial and risk management remains untapped, with significant progress still needed in their adoption and utilisation.

The LMA’s survey, conducted in partnership with Barnett Waddingham, found that scepticism around AI and ML persists, driven by concern around regulation.

“Many respondents cited the difficulty in validating outputs, as well as issues with their reliability and accuracy. Alongside these concerns, many interviewees flagged a lack of AI and ML skills and experience in their organisations, with the need for training and additional resources viewed as essential,” the LMA said.

As per the survey, most respondents would reportedly appreciate more practical guidance on how AI and ML can be responsibly and effectively integrated into their professional work, without preventing innovation.

“Regulatory compliance has been noted as a concern when using third-party AI tools, which has held back the pace of adoption,” the LMA added.

The survey found that actuarial professionals are more optimistic about AI and ML, as the quantitative nature of their work makes the opportunities and benefits of these tools more tangible.

In contrast, risk professionals reportedly showed greater hesitancy in investing in AI and ML, citing their reliance on relatively less quantitative data.

Meanwhile, data quality remains a concern, with the LMA’s survey results noting that AI models are only as reliable as the data they are trained on. Other considerations include the need for continuous improvement, as well as transparency and interpretability.

On this, the LMA observed, “Ig human resource can be trained to cope with and adapt to those data vagaries and shortcomings, then so can AI, in time, probably better and faster. Data will never be perfect, so why let it be a reason not to embrace the opportunity?”

Sanjiv Sharma, Head of Actuarial and Exposure Management at the Lloyd’s Market Association, commented, “The results of this survey show that there is a long way to go in adopting and leveraging the full potential of AI and ML tools. Currently, the focus is on automation and efficiency gains, but I would encourage market firms to actively explore the opportunities in this space.

“Firms that successfully integrate AI and ML into their actuarial and risk functions and beyond, can gain a competitive edge and make more informed strategic decisions.

“They are tools that can drive real innovation, if users are able to balance the potential benefits with the compliance and ethical considerations that will be key to Lloyd’s participants continuing to lead in global insurance.”

Wan Hsien Heah, Partner and Head of General Insurance at Barnett Waddingham, said, “It’s been a pleasure collaborating with the LMA on this survey, which is aimed at providing the market with insights on the adoption of AI and ML.

“Challenges remain when it comes to further adoption, but the survey will hopefully spur discussions that will lead us towards defining what market practice looks like for implementing AI and ML in actuarial work within general insurance.”

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According to a recent survey by the Lloyd’s Market Association (LMA), the full potential of artificial intelligence (AI) and machine learning (ML) in actuarial and risk management remains untapped, with significant progress still needed in their adoption and utilisation. The LMA’s survey, conducted in partnership with Barnett Waddingham, found that scepticism around AI and ML…