AI, machine learning offer great opportunities and major risks for insurers

But with that promise comes risk – perhaps greater than the risks inherent with all new technologies – that the insurance industry needs to consider. The Financial Stability Board released a detailed report this month on the potential upsides and downsides of AI, most of which align with Novarica's research of the technology. Many of the risks highlighted in the report stem from the increasing reliance financial services companies will have on outside technology companies for key business components. Another source of risk is that the results of AI and machine learning may be too complex for humans to fully understand. As the FSB report puts it, "New trading algorithms based on machine learning may be less predictable than current rule-based applications and may interact in unexpected ways."