AI risk management for insurers

Abstract

Artificial intelligence (AI) is rapidly reshaping the UK insurance sector, offering significant opportunities for efficiency, innovation, and improved customer outcomes. At the same time, AI introduces complex and fast-moving risks relating to model opacity, bias, data protection, consumer fairness, operational resilience, and third party dependency. This paper argues that AI does not constitute a wholly new category of risk for insurers; rather, it acts as a powerful amplifier of existing enterprise risks, increasing their speed, scale, connectedness, and potential impact. Drawing on regulatory guidance, industry practice, and emerging AI risk frameworks, the paper examines divergent stakeholder perspectives on AI adoption, including those of insurers, regulators, and consumers. It highlights a growing consensus that organisations must act now to integrate AI risk considerations into established enterprise risk management (ERM) frameworks, rather than relying on parallel or siloed AI governance structures. The paper proposes a principles-based practical approach for embedding AI risk within existing taxonomies, registers, and control environments, with particular emphasis on identifying where AI amplified prudential, conduct, data protection, resilience, reputational, and third party risks. Particular attention is given to the role of data protection impact assessments (DPIAs) as a critical governance mechanism for identifying and managing AI-amplified risks, aligned with UK regulatory expectations and international developments such as the National Institute of Standards and Technology (NIST) AI Risk Management Framework (RMF) and the forthcoming European Union (EU) Artificial Intelligence Act (AI Act). The paper concludes that insurers which proactively integrate AI governance into core ERM processes, supported by cross-functional collaboration between risk, compliance, data protection, and technology teams, will be best positioned to realise AI’s benefits while maintaining consumer trust, regulatory compliance, and resilience. This article is also included in The Business & Management Collection which can be accessed at https://hstalks.com/business/.