FutureProof: The impact of AI on the world of professional indemnity insurance

Welcome to FutureProof - a new series of articles, events and insights from Mills & Reeve focusing on the rise of AI and its impact on the world of professional indemnity insurance.

Over the next few months, we’ll be looking at a whole range of issues connected with AI, its use by professionals, and the implications for those professionals and their insurers.

In particular, we’ll be taking a look at:

• How professionals across a range of sectors are already using AI and how AI is likely to change the way those professionals work in the future
• How the use of AI may change the claims landscape for professional indemnity insurers and the issues that insurers need to be thinking about now 
• The regulatory landscape surrounding the use of AI by professionals
• How the law of professional negligence might develop as a result of AI
• What all of this means for professionals and their insurers

Our FutureProof series is designed to be of interest to anyone connected with the professional indemnity market – including professionals, brokers, insurance underwriters and (of course) those of you who handle claims against professionals when they arise. As the series develops, we’d also love to hear from you with your own thoughts and insights!

In this first article, we share insights about what AI actually is, how it works, and why it’s likely to change the way that professionals such as lawyers, architects, and accountants currently work as the technology continues to develop. 

What is AI?

In basic terms, AI is simply a catch-all term for technology that enables computers and machines to simulate human intelligence and problem-solving capabilities.    

We already use many forms of (what’s commonly called) “narrow” AI in our everyday lives. The virtual assistants on our smartphones and the algorithms which suggest what we might like to watch on a streaming service all use some form of narrow AI. This type of AI is generally designed and developed to replicate human behaviour for specific tasks.

Generative AI is somewhat different and the clue is in the name. It’s a type of AI which can generate create new content - including text, images and even music and videos. It uses a complex series of computing processes (including neural networks which are designed to replicate the way in which a human brain works) to analyse common patterns and arrangements in incredibly large sets of data. Generative AI then uses this information to create new, convincing, outputs. It does this by using various machine learning techniques to predict outcomes, which means it can be trained and improve its outputs over time.    

What are LLMs and how do they work?

Large Language Models (LLMs) such as Chat GPT, and Image LLMs, are types of Generative AI. They are trained to understand and generate human-like text, or images, based on patterns they have learned from vast quantities of training data available via the internet. They produce outputs based on inputs – in the form of text and user prompts.  

The more data available to LLMs, the more sophisticated they become. But they can also get things wrong because the sources of information they’ve been trained upon (including the internet) may contain inaccuracies or biases. In addition, they can sometimes hallucinate and create incorrect outputs which appear credible when there is a gap in the information they’re trained on. All of this can be mitigated by various techniques such as “prompt engineering” (which involves refining the user’s prompt so the AI model can provide more relevant and accurate responses) and “grounding” (which involves training the LLM on accurate and reliable sources of information). However, for now, some risks cannot be alleviated completely. 

How AI is changing the way professionals work

Professionals are already using “narrow” AI in a variety of ways and the use of Generative AI is increasing. For example, lawyers have been using “narrow” AI for some time to speed up and improve the accuracy of the e-disclosure process in litigation. Architects are using Generative AI to produce incredibly creative concept-stage designs for new buildings and developments. The “Big 4” firms of accountants are making huge investments into new Generative AI tools and smaller practices are already using “narrow” AI in a variety of ways.  

As we’ll be exploring in this series, the use of AI has massive potential benefits to professionals. It can help to automate more routine tasks, improving accuracy and driving efficiencies and cost-savings. It will also help professionals to analyse massive amounts of data - enhancing the way in which professionals make decisions and provide advice to clients.  AI will also enhance research and development across a range of sectors, as well as making it easier for professionals to collaborate - both within their own organisations and with clients.

The use of AI may also help to drive down some types of claims that we commonly see being made against professionals. In particular, it may help to iron out some of the basic human errors which currently give rise to claims. But, as we’ll be exploring, the use of AI is also likely to give rise to new types of claims. It will also throw up a range of legal and regulatory challenges that professionals and their insurers need to be aware of as the use of AI increases.

Find out more about our FutureProof series and the team behind it.