A new report from ratings agency AM Best, entitled Recent Layoffs by Insurers Alone Do Not Signal Rating Pressure, examines recent layoffs made by insurers in the United States, saying artificial intelligence (AI) can eliminate human touchpoints, and it has increased profitability for insurers, but they add that it is too early to say this is the reason why insurers are downsizing their workforces.
“AM Best notes that even as hiring levels decline and layoffs appear to be rising across the insurance industry, it is too soon to cite AI as the leading cause of the job losses, at least at this nascent stage,” they write. “The recent layoffs would more likely fall into the cyclical, rather than structural category.”
In the report, they further point out that structural unemployment refers to jobs that are made redundant because of systemic changes, the adoption of technology, or a misalignment between a business’ needs and employees’ skills. Cyclical unemployment is driven by the business cycle, “which seems to be the case in the insurance industry,” they write.
They add that personal lines writers, including auto and homeowners’ insurers are the most affected by current layoffs. “As AI capabilities broaden and insurance companies become more comfortable using AI for business processes, either through their own efforts or by outsourcing, automation will impact industry employment levels and a much wider set of occupations,” says AM Best director, Edin Imsirovic.
They add that given that the technology is still in its early stages, having human expertise available in the near term is critical. “The implementation of AI solutions comes with its own challenges. Insurers will have to address technical challenges, the limits of legacy systems and problems with data integration. For some insurers, the implementation of AI models and algorithms may necessitate a large investment in time, money and experience.”
