What’s behind insurance layoffs? –AM Best digs into key factors

Artificial intelligence (AI) has become a topic of discussion following recent news of a string of layoffs in the insurance industry. Several insurance giants have announced significant job cuts as part of cost-cutting measures.

In a commentary, AM Best noted that AI will eventually change jobs in the industry but also emphasized that while AI increases productivity for insurers it is not the main reason for recent layoffs.

AM Best said it is too early to say that AI is the cause of recent job losses at some insurance companies, describing this period as the “nascent stage.”

Data from the US Bureau of Labor Statistics revealed that the rate of hiring in the insurance industry and related fields slowed by an estimated 1,100 positions in October. This was down from September numbers, which showed about 3,900 people were hired, as well as July numbers, which showed that 8,300 workers were hired by insurers and related companies. .

Changes in the business cycle

“Recent layoffs are more likely to fall into the cyclical, rather than the structural, category,” according to AM Best analysts.

Cyclical unemployment means that the fluctuation of employment is driven by the business cycle, while structural unemployment is caused by the reduction of positions following changes in the system or the adoption of technology.

Among those most affected by the current layoffs are personal lines writers, analysts said. Loss cost inflation, reinsurance capacity and pricing, and an increase in climate risk are some of the factors that pressure carriers’ loss ratios and underwriting margins. Personal lines insurance can also be less complicated, and more amenable to automation.

Meanwhile, commercial lines require a manual underwriting process. Underwriting is time and resource intensive, and therefore a quote can take weeks to complete and issue on most high value accounts. AI offers the opportunity to automate some underwriting processes, such as reviewing and analyzing customer demographics and preferences, so that human attention can be dedicated to the most complex tasks and final decision-making.

“The proliferation of AI has led to new jobs, as the demand for specialized skills grows,” analysts say.

AI has many potential applications, including creating marketing content, providing customer service, and analyzing legal documents.

“Although the overall impact of generative AI on employment remains uncertain, it is likely to change the way society works, as current employees learn to harness the power of this emerging technology. ,” analysts said.

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