Everyone knew that the entry of AI into the insurance sector was both a good thing and a bad thing.
Perhaps some of us thought that the good times would roll for a little bit longer than they have before the pitfalls and dangers reared their head – but the reality is that the rising risk of AI has well and truly arrived in the insurance sector.
The US market is often the frontrunner for new and emerging risks and the policies aimed at mitigating them – and so it has panned out for AI risk, where health insurer Cigna has been accused of automatically rejecting thousands of claims by using AI-based algorithms although California law requires each claim be examined individually.
A lawsuit filed in a US federal court says Cigna and Cigna Health and Life Insurance rejected more than 300,000 payment claims in two months in 2022.
According to the lawsuit, the company used an algorithm called PXDX (procedure-to-diagnosis) to identify whether claims met certain requirements. The average time spent on each review was 1.2 seconds. Huge batches of the rejected claims were then sent to doctors who signed off on the denials.
The lawsuit was filed on behalf of two Cigna policyholders who were forced to pay for tests after the company denied their claims. In a statement Cigna Healthcare said the lawsuit “appears highly questionable and seems to be based entirely on a poorly reported article that skewed the facts.”
The real issue that should concern insurers is whether the introduction of AI into their procedures could be construed as being contrary to prevailing law in whichever jurisdictions the carriers choose to employ AI. From the isolated Cigna case in the US, this could be a cost headache for which insurers in general have not budgeted.
Sticking to the US for the moment, the American Psychological Association has just published research that suggests that exposure to AI could lead to loneliness and insomnia for employees.
The research, ‘No person is an island: Unpacking the work and after-work consequences of interacting with AI’, conducted four sets of experiments in Taiwan, Indonesia, Malaysia and the US and the findings were consistent across cultures.
University of Georgia assistant professor and lead researcher Pok Man Tang said, “The rapid advancement in AI systems is sparking a new industrial revolution that is reshaping the workplace with many benefits but also some uncharted dangers, including potentially damaging mental and physical impacts for employees.”
On the upside, the report said that working with AI systems may have some benefits. The researchers found that employees who frequently used AI systems were more likely to offer help to fellow employees, but such a response may have been triggered by loneliness and need for social contact.
What seems beyond doubt is that AI represents a whole new category that corporate risk managers will have to be aware of – and for which insurers will have to develop new products.
The market for such covers is likely to grow fast and legal test cases may pop up with increasing frequency as AI proves truly to be a double-edged sword. A
Paul McNamara
Editorial director
Asia Insurance Review