Online insurance transacting: implications for policyholders relying on AI and emerging technology

Technology offers consumers access to a plethora of information. The review of the information by the consumer ought to lead to better decision making in the purchase of goods and services. However, the authenticity and efficacy of information may be questionable: it may be bias or influenced by ulterior motivation.

These issues arise in the context of online insurance transacting. We have observed a significant amount of misinformation on the internet. Social media may misrepresent how certain policies respond to losses.

Consumers may express a poor experience with an insurer: the genesis of same may be their own conduct that had caused a claim to be denied or indemnity significantly lower than expected. A complainant will rarely take personal responsibility for an error in their own ability to understand a contract of insurance that they selected.

Despite popular opinion, Insurers are not in the business of denying claims. Most insured losses are managed efficiently and paid. Indeed, insurers are seldom acknowledged for the critical part they play in restoring the “post-loss” status quo.

Conversely, insurers are not advocates for policyholders. They are not duty bound to maximise payments following a loss. They are in the business of providing cover in line with the contract of insurance agreed at the time the policy is purchased by the policyholder.

Insurers continue to invest significantly in online platforms for direct distribution to consumers. The intended benefit is a lower cost of transacting (reduced premiums). Conversely the consumer procures insurance based on informing themself as to the suitability of insurance.

Comparison websites ordinarily operate to distribute a select panel insurers’ product. They do not identify what is being offered by all insurers operating in a marketplace. The consumer obtains the coverage selected, which is based on “general advice” provided by the website. It does not take into consideration the personal circumstances of the consumer, nor is it likely that the consumer will consider the details in the product disclosure statements across all products compared.

Consumers must also be cognisant that the insurance contract is based on the information and disclosures provided to the insurer. Where such disclosures are incorrect or misstated the insurer may rely on that non-disclosure to reduce or avoid liability for a claim – see our article here.

The client must be able to articulate their loss to the insurer at the time of a claim. Preparing proof of loss can be very difficult.

The coverage offered directly to consumers for small business, motor, landlord, home and contents and other products varies significantly across the levels of cover selected. It is difficult for a consumer to determine the coverage suitable for their circumstances. Regulation exists to assist the purchaser making their decision, but absent professional advice it is difficult to understand the ramifications of choosing one policy over another.

Then there is the emergence of artificial intelligence (AI) across the insurance industry. If you ask it, it will tell you that it brings so many benefits to the insurance industry. These include predicting risk trends; providing access to reliable underwriting data; streamlining transacting (including application and claims processes); detecting fraud, and, identifying consumer behaviour in the interest of successfully converting new policyholders. We consider that AI certainly does have a place in the industry and will play a significant role in various aspects of insurance transacting. However, we do observe commentary regarding the “trust” of consumers of AI. A Forbes Advisor Survey of 20 July 2023 states that 76 per cent of consumers are concerned with misinformation from AI tools such as Google Bard, ChatGPT and Bing Chat.

Further, in Clayton Utz’s article of 21 February 2023, it suggests that AI is playing and has a significant role to play in the future, but warns of shortcomings. These include that AI may itself rely on misinformation in adducing its answers; and that it may not be able to advise on matters that are confidential in nature (only known by an insured), and for instance whether such information is relevant to an Insured’s disclosure obligations.

In short, consumers should consider whether they are capable of making critical decisions based on information in various media or via direct insurer platforms. This includes the use of AI to inform such critical decisions. Consumers should have their coverage reviewed by an expert to ensure they are adequately and appropriately insured.

We would strongly counsel against business consumers utilising online portals or becoming susceptible to “general advice” warnings, wherein they inform themselves as to the appropriateness and adequacy of cover.

Bellrock offers risk advisory and claims advocacy services to medium to large enterprises. We would recommend that personal insurances are reviewed by an expert intermediary offering those services. Should you require recommendations of providers, please do contact us.

For medium to large enterprise, Bellrock can assist you with commercial property and casualty insurance. For office bearers and directors of our clients we can assist you with a review of personal general insurance products.