Transforming Insurance: The Impact of Physical Artificial Intelligence
The advancement of "physical artificial intelligence," including autonomous vehicles and humanoid robotics, is poised to significantly transform the insurance industry. Chris Raimondo, leading insurance consulting for EY in the Americas, suggests this transformation might surpass previous AI-induced changes in impact.
According to the International Data Corporation, investments in artificial intelligence are predicted to exceed $500 billion by 2027, with a significant focus on robotics and autonomous systems. Meanwhile, Goldman Sachs predicts the humanoid robotics sector will reach $150 billion by 2035, driven by labor shortages and advancements in machine learning.
Impact on Liability and Underwriting Models
Raimondo highlights that physical AI could reshape liability models and underwriting processes. Insurers are starting to consider the implications of machines operating in the tangible world. He states, “Physical AI could potentially be more disruptive to the insurance industry than digital AI,” indicating the nascent stage of insurers grappling with these changes.
One major disruption involves reassessing liability. Traditional insurance frameworks, such as motor and workers' compensation insurance, have centered on human accountability. However, autonomous systems introduce a more complex value chain, prompting a shift toward "system-centric liabilities."
Adapting Insurance Products and Claims Processing
Raimondo points to autonomous vehicles as an example, where liability may involve vehicle manufacturers, AI software platforms, and owners. This evolution forces insurers to consider risks related to software updates and sensor capabilities, prompting a move toward dynamic underwriting.
Insurance products now reflect these changes, with companies like Lemonade introducing usage-based policies that alter premiums based on a vehicle's operational mode. Additionally, the transformation extends to infrastructure coverage, focusing on charging networks, data centers, and smart roads essential for these technologies.
Claims processing is also experiencing a shift. Traditional investigative methods are giving way to reliance on sensor data, OEM logs, and software diagnostics in claims evaluations. While other AI forms have influenced internal efficiencies, physical AI is altering core insurance offerings, necessitating adaptations across the insurance value chain.
The adoption and impact of these changes depend on the uptake of autonomous vehicles and robotics, which varies by region. As investments grow and regulatory guidelines evolve, insurers and stakeholders must adapt to these emerging pressures, embracing the opportunities and challenges posed by physical artificial intelligence.