RANCHO MIRAGE, California – Captive insurers can harness new technologies and help organizations innovate, but these efforts must be aligned with the strategic goals of the parent company, experts say.

They were speaking Monday during a session at the Captive Insurance Companies Association 2023 International Conference.

Artificial intelligence and machine learning technologies may offer captives positive ways to mitigate risks, said Mark Field, director, risk and insurance operations team, office of the general counsel, at Sutter Health, a Sacramento, California-based health care system.

For example, ChatGPT, an artificial intelligence chatbot developed by OpenAi, has racked up 100 million users, based on news reports, Mr. Field said.

When he went online and asked the chatbot what innovations will artificial intelligence bring to the insurance industry and how can artificial intelligence help captive insurance companies, it provided an answer in about 15 seconds, he said.

Captives may be able to apply AI technologies in the areas of fraud detection, claims processing and underwriting, he said.

“I don’t think, and I don’t hope for all of our sakes that we’re going to be replaced by robots or AI, but perhaps there’s an advantage or opportunities,” to applying these types of technologies, Mr. Field said.

AI tools have limitations, said Deyna Feng, director, captive programs, for Columbus, Indiana-based power technology company Cummins Inc., noting they may incorrectly answer questions regarding simple calculations.

It will take time for AI technologies to add value and using them in combination with humans brings a level of competency, she said.

“The value of a human being is that you answer something, and you may wonder whether it’s right or wrong, but for the robot, it doesn’t matter as long as you get the answer it is competent to answer,” Ms. Feng said.

Captive boards and operations need to be aligned with the parent organization’s goals to move forward with innovation, said Heather McClure, Dallas-based chief risk officer, national healthcare practice, commercial risk solutions, at Aon PLC.

Establishing the captive as a partner with the organization’s innovation strategy, making sure it’s known to the company’s board as more than just a tool to finance risk in a hard insurance market, is important, she said.

Captives also need to act as a source to enable innovation within the organization, rather than as a department that says “no,” she said.

Defining objectives rather than using technology for technology’s sake is key, Mr. Field said.

“Define your objective. If it’s technology-enabled, great, but don’t go out and say, ‘OK, we’re going to come up with the best AI tool for whatever you want,’” Mr. Field said.

Whether the technology adds value and accomplishes an organization’s operational goals is critical, he said.