AM Best: Recent insurance layoffs not primarily due to AI
AM Best doesn’t think that Artificial Intelligence (AI) is the main reason why so many people have lost their jobs in the insurance business recently.
The credit rating agency recently said in a report that “it is too soon to cite AI as the leading cause of the job losses, at least at this nascent stage.” He said that the layoffs are more likely to be in “the cyclical, rather than the structural, category.”
The rating agency said that structural unemployment is when jobs are lost because of changes in the system, the use of technology, or a mismatch between what the business needs and what the workers can do. Employment changes caused by the business cycle are called cyclical unemployment. AM Best said, “This seems to be the case in the insurance industry.”
Recently, Liberty Mutual, American Family, and GEICO all said they were cutting staff. This new information comes after those companies. According to AM Best, the most recent layoffs have an impact on personal lines insurance the most. This will have the most impact on personal lines insurance because loss ratios and underwriting margins are being pushed down by rising climate risk, loss cost inflation, and reinsurance capacity and price.
The commentary stated that the recent layoffs by insurers alone do not indicate any pressure on ratings
AM Best did say that advances in artificial intelligence will slowly change the job outlook in the insurance business. AM Best stated that many insurance companies are testing generative AI because they think it could help them with customer service. They also said that the level of industry disruption will depend on how fast AI develops in the coming years.
AM Best also mentioned that it’s still not clear what effect generative AI will have on jobs, but it will probably change the way society works as current workers learn how to use the power of this new technology.
The Bureau of Labor Statistics says that insurance companies and other related businesses have slowed down their hiring to about 1,100 jobs in October. This was less than the number of new hires in September (3,900) and July (8,300), according to the BLS.
There have also been layoffs at insurance technology companies. Earlier this year, Hippo, Branch Insurance, Corvus Insurance, and Pie Insurance all said they were letting people go. Thimble, NEXT, Lemonade, and Root were some of the insurtechs that cut staff last year.