​

     Artificial Intelligence (“AI") has been in the news a lot lately.  Almost every day there is another news story about how AI can be used in some aspects of our day-to-day lives. A number of insurance agencies and brokerages have advised us that they are starting to use AI in connection with their daily business operations.  So, is AI OK for an insurance agency or brokerage to use without presenting potential E&O issues in the process?  For our advice on this topic, continue reading.  In this issue of The E&O Report we will discuss some of the ways that AI is being used by insurance agencies and brokerages and the benefits, and also potential problems, that it presents.

     Policy checking is an important aspect of the operations of every insurance agency or brokerage.  Years ago, many agencies and brokerages had employees whose jobs were solely to check policies.  Their job was to carefully review insurance policies prior to them being delivered to the insureds to see if there were any errors or changes that needed to be made. Today, most insurance agencies and brokerages do not have employees whose only job is to check insurance policies.  Instead, the job of policy checking at most insurance agencies and brokerages is usually done by the customer service representatives that handle the servicing of the particular accounts. The task of policy check is a tedious one that, depending on the type of insurance policy involved, can sometimes take hours to complete.  Because policy checking is an arduous thing to do, quite often the employees responsible for doing it will put off doing it for days, weeks, or even months after the policy is received by the agency or brokerage. This delay in delivering the insurance policy to an insured presents potential E&O issues for the agency or brokerage if a loss occurs and an insured has not yet received their policy. For example, the duty to read defense, that we regularly assert in E&O lawsuits, cannot be asserted as a defense by an agency or brokerage when the insured had not yet received the insurance policy at issue at the time of a loss.

     In order to help expedite the policy checking process some insurance agencies and brokerages have turned to AI to check insurance policies.  There are a number of companies that provide AI policy checking services.  The main benefit of using AI to check insurance policies is that the entire process can usually be done in minutes, instead of the hours that it may take an employee to do the same thing.  Some of the companies that offer AI policy checking indicate that the process is usually about 95% accurate.  Although the 5% chance of error is relatively small, it does present an E&O concern that something can, or will, be missed.  While no human is ever 100% accurate in their job, we like to believe that a knowledgeable and experienced employee of an agency or brokerage would likely have an accuracy rate higher than 95% for policy checking.  Accordingly, if the use of AI for policy checking is something that your agency or brokerage is either doing or contemplating doing, we suggest that, at least in the beginning, the process should be overseen and double checked by a knowledgeable and experienced employee who can confirm the accuracy of the AI policy review.  We are currently handling an E&O lawsuit that is pending against an insurance agency that arose because the insurance policy at issue was checked by AI and the wind deductible that was added to the policy was not caught and corrected. 

     Another area that we see insurance agencies and brokerages using AI is in connection with the drafting of correspondence and other documents.  Unfortunately, the correspondence and other documentation that we have seen drafted by insurance agencies and brokerages using AI is not always completely accurate; and this could create potential E&O issues.  Accordingly, if your agency or brokerage is using, or contemplating using, AI to assist with the drafting of correspondence and other documentation, the document that is created should be checked for accuracy by an experienced employee and then modified as necessary.  Using AI in this manner will help the agency or brokerage prevent potential E&O problems that may arise related to the document at issue.     

     AI is certainly a tool that insurance agencies and brokerages can use to assist employees to help save time in their daily activities.  However, the prudent insurance agency that uses AI in connection with its business operations should make certain that it adopts the necessary practices and procedures regarding how AI is to be used by employees and also how the accuracy of what is done by AI can be ensured.  Doing so will help the agency or brokerage prevent potential E&O issues from arising related to its use of AI.