AI not main cause of recent insurance layoffs
Source: Middle East Insurance Review | Dec 2023
In a commentary the credit rating agency AM Best said that “it is too soon to cite AI as the leading cause of the job losses, at least at this nascent stage.” Instead, the layoffs likely fall into “the cyclical, rather than the structural, category.”
The commentary by the rating agency explained that structural unemployment refers to jobs that are made redundant because of systemic changes and the adoption of technology, or a misalignment between business needs and employee skills. Cyclical unemployment refers to employment fluctuations driven by the business cycle, “which seems to be the case in the insurance industry.”
This insight comes after Liberty Mutual, American Family and GEICO announced staff reductions in recent months. AM Best wrote that personal lines are most affected by the latest layoffs, as loss ratios and underwriting margins are pressured by loss cost inflation, reinsurance capacity and pricing and rising climate risk. The commentary said the recent insurer layoffs alone do not signal ratings pressure.
The commentary said that AI related advances will, however, gradually reshape the outlook for insurance industry employment. It said many insurance companies are experimenting with and are motivated by generative AI’s customer service potential. The speed at which AI develops over the coming years will determine the level of industry disruption.
“Although the overall impact of generative AI on employment remains uncertain, it will likely change the way society works, as current employees learn to leverage the power of this developing technology.” M