Artificial intelligence is reshaping how insurers and brokers think about risk, creating exposures that were barely on the radar just a couple of years ago.
Speaking to Insurance Business, James Bullock-Webster (pictured), director and head of tech, media and cyber at New Dawn Risk, said the pace of AI adoption has been “incredibly powerful” and is forcing underwriters to adapt quickly.
“We’re all living it, aren’t we?” he said. “It’s developed so quickly, at such pace, that it is very much a reality for all of us now.”
For insurers, that reality cuts both ways. On one hand, clients across industries are experimenting with AI to boost efficiency and productivity. On the other hand, the risks are multiplying. Bullock-Webster pointed to challenges such as algorithmic bias, data privacy breaches, and the threat of cyberattacks powered by AI. The rise of generative tools has also brought new exposures, from deepfakes and misinformation to accusations of copyright infringement against large language models. These are issues that were hardly on the radar until recently, but are now shaping underwriting conversations.
“There are an awful lot of unknowns,” he said. “There are known unknowns and unknown unknowns, as Donald Rumsfeld would say, and I think there are a lot of unknown unknowns with AI. So insurers absolutely know they have to get arms around it, be prepared to have that risk transferred to them in order to remain relevant.”
At the same time, AI holds defensive potential. Bullock-Webster noted that the same technology fueling cyber threats can also help businesses strengthen their protections.
This creates what he described as an “AI arms race” between bad actors and legitimate companies, a dynamic that insurers will need to monitor closely. “Somehow insurers have to understand that, keep pace, monitor and develop, and continue to provide solutions for their clients,” he said.
Bullock-Webster added that the insurance sector’s response to AI is also shaped by the structure of the market itself. Smaller players such as managing general agents (MGAs) can often move faster, unburdened by the legacy systems that slow down larger carriers. At the same time, global players bring the scale and financial strength needed to backstop emerging risks.
From his vantage point as a part of a Lloyd’s registered broker, Bullock-Webster noted that MGAs play a critical role in balancing this equation. “Probably about 40% of all capacity and premium that’s collected at Lloyd’s is done through third parties like MGAs,” he said. “They delegate their capacity to be able to get into niche markets. MGAs provide a platform that can be really efficient and ultimately give Lloyd’s access to areas it wouldn’t necessarily reach otherwise.”
Lloyd’s syndicates themselves, he added, often enjoy greater flexibility around wordings and creative solutions compared to more tightly constrained domestic carriers in North America. That autonomy, combined with MGA partnerships, positions Lloyd’s to move more quickly in adapting products to the AI era. However, the imperative is the same across the industry.
“AI is here and the genie’s out of the bottle,” Bullock-Webster said. “All insurers are going to have to develop and provide solutions quickly. If they don’t, they’ll become redundant – clients and brokers will go elsewhere.”
Beyond how insurers structure themselves, Bullock-Webster warned that adopting AI directly in underwriting and claims processes could generate fresh liabilities. As carriers experiment with automation to improve efficiency, they also expose themselves to the risk of algorithmic errors.
“If these systems make mistakes – like wrongly denying a claim or unintentionally discriminating – insurers could end up facing regulatory investigations or lawsuits,” he said. That means the technology designed to cut costs could just as easily create expensive new exposures.
For brokers, the stakes are equally high. As AI becomes embedded in carriers’ operations, brokers will need to understand not just the products they place but also the processes behind them. Explaining to clients how insurers use AI, and what risks or limitations may come with it, could become a vital part of advisory work. Bullock-Webster suggested this evolution may even create demand for new types of professional liability insurance, protecting intermediaries who are caught in disputes over AI-driven decisions.
