Hogan Lovells 2024-2025 AI Trends Guide - Flipbook - Page 30
Taking the world by storm: AI, climate
ambitions and insurance
The explosive pace of development and adoption of AI solutions has led to
high hopes of the technology being used to help solve some of the world’s
most pressing problems, including climate change.
Scientists are developing AI solutions to support efforts to meet climate
targets and help slow down and reverse environmental impacts. Whilst there is
unlikely to be a ‘silver bullet’ solution to climate change, the combined effect
of initiatives that use AI to enhance insights about the cause and effects of
climate change and to optimise energy consumption may be very significant.
However, AI is also extraordinarily energy intensive. A generative AI system
is estimated to use around 33 times more energy than simple task-specific
software and the consumption of electricity by data centres has dramatically
increased in recent years.
For the insurance industry, the impact of climate change is profound, and
AI may offer solutions to some of the most pressing challenges for insurers.
AI solutions for assessing and pricing risk will be critical to insurers offering
products in areas where environmental events present significant risk. For
example, AI can be leveraged to better assess the risk of (and even predict) the
occurrence of floods or forest fires. Claims automation capabilities powered
by AI can also assist insurers to manage large volumes of claims arising from
adverse weather events. At a portfolio level, insurers can also use AI to more
effectively stress-test their exposure to climate risk and adapt their products
and their business models accordingly.
With increasing pressure on governments and businesses to implement
measures to mitigate and offset the energy and resource consumption of
AI capabilities, insurance companies will need to find a way to balance the
benefits of AI with their sustainability objectives in order to ensure that the
adoption of this powerful technology does not come at the expense of climate
commitments.
Additional
resources
Spotlight
Insurance Horizons 2023-2024
Authors
Louise Crawford
Partner
London
Lydia Savill
Partner
London
