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Artificial Intelligence

Last Updated 03/27/2020

Issue: Artificial intelligence (AI) is a technology which enables computer systems to accomplish tasks that typically require a human's intelligent behavior. Examples include gathering information, analyzing data by running a model, and making decisions.

The use of AI has increased exponentially across all industries over the past several years. The rise in accessible data, increased computing capabilities, and changing consumer expectations has led to a strong acceleration of AI development. We are now using AI throughout the landscape of our lives-often without realizing it. Consequently, AI is rapidly evolving and creating viable opportunities for business growth. It is disrupting and improving organizations across all industries, including insurance. Companies such as IBM, Apple, Google, Facebook and Amazon are leveraging AI platforms and solutions for customers, partners and employees.  In the insurance industry, AI is transforming areas such as underwriting, customer service, claims, marketing and fraud detection.

Background: Over the past several years, AI technology has progressed immensely and continues to develop and improve all the time. It has become increasingly proficient at performing tasks historically difficult for computers to execute, including recognizing images, identifying spoken words and using unstructured data. The acceleration in AI is being driven by exceptional technological advances along with a major shift in customer expectations. Higher computing power, memory capacity, cloud computing, big data technologies, and global connectivity of both people and machines have enabled machines to run complex algorithms faster than humans and handle more input data than a human could. Moreover, shaped by their experiences with other industries, insurance customers, particularly millennials, now expect quick on-demand services.

The successes of AI are also being facilitated by the massive amounts of data we have today. The wealth of data we now create is astonishing, and the speed at which data is generated has only made data management tools like AI even more important. Whether it is structured or unstructured data (e.g., social media, wearables, telematics, sensors, news, weather and traffic reports), AI is helping insurers make sense of big data. As of 2018, driverless test cars produced roughly 30 terabytes of data a day, stemming from on-vehicle sensors and digital maps. Statistical models cannot handle the large quantity of data. As AI is able to execute complex analyses and computations at a speed impossible for humans, it generates faster insights.

AI has the potential to affect the insurance industry in multiple ways. It is currently being used in claims processing, underwriting, fraud detection and customer service. For example, to improve customer experience, many insurers are investing in virtual assistants like chatbots. A chatbot is a digital service capable of holding natural sounding conversations with human beings with the aim of accomplishing particular tasks, such as answering questions. In addition to answering questions, chatbots are available 24/7 to give basic advice, check billing information, and address common inquiries and transactions. Insurers currently using chatbots include startup Lemonade, Geico, Allstate and Lincoln Financial. In addition, claims management can be augmented using machine learning techniques in different stages of the claim handling process. Machine learning models can help quickly assess the severity of damages and predict the repair costs from historical data, sensors and images. Lemonade, for example, asserts that, as early as 2016, its chatbot Jim settled a claim within 3 seconds. A 2018 Accenture Survey found four out of five insurance executives believe that AI will work next to humans in their organizations as a co-worker, collaborator and trusted advisor within the next two years.

Moreover, insurers are sitting on a treasure-trove of big data, the main ingredient AI requires to be successful. The abundance unstructured data can be leveraged through AI to increase customer engagement, create more personalized service and more meaningful marketing messages, sell the right product to customers and target the right customer.

Status: The insurance industry has only begun its venture into AI, with many traditional insurers' experimenting with new ways to incorporate it into their day-to-day operations in anticipation of further technological development. InsurTech startups are also utilizing AI to develop solutions to streamline operations, create better underwriting models and enhance customer service. However, while AI provides opportunities for traditional insurers to modernize themselves, implementing AI is not straightforward. Traditional insurers could face challenges integrating AI into their existing technology due to issues such as data quality, privacy and infrastructure compatibility.

The NAIC formed the Innovation and Technology (EX) Task Force to explore the technological developments in the insurance sector. The Task Force provides a forum for the discussion of innovation and technology developments in order to educate state insurance regulators on how these developments will affect consumer protection, insurer and producer oversight, and the state insurance regulatory framework. The Task Force is also charged to discuss emerging issues related to insurers or licensees leveraging new technologies, such as artificial intelligence. In addition, the NAIC Center for Insurance Policy and Research has hosted several AI-focused events and webinars most recently at the 2019 Summer National Meeting.

In 2019, the Task Force established an Artificial Intelligence Working Group to study the development of artificial intelligence, its use in the insurance sector, and its impact on consumer protection and privacy, marketplace dynamics, and the state-based insurance regulatory framework.  The Working Group is developing regulatory guidance and will make recommendations to the Innovation and Technology (EX) Task Force as appropriate by the 2020 Summer National Meeting.

Committees Active on This Topic

Additional Resources

NAIC Principles for AI
February 2020, Artificial Intelligence (EX) Working Group

Challenges for the Insurance Industry in the Future
December 2019, Journal of Insurance Regulation

CIPR Event: Demystifying the Use of AI in Insurance

August 2019

OECD Principles on Artificial Intelligence
May 2019

Intelligent Machines and the Transformation of Insurance
January 2019, CIPR Newsletter


Media queries should be directed to the NAIC Communications Division at 816-783-8909 or

Media queries should be directed to the NAIC Communications Division at 816-783-8909 or

NAIC Center for Insurance Policy and Research (CIPR)

Denise Matthews
Director, Data Coordination and Statistical Analysis 
Phone: 816-783-8007

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