The use of the artificial intelligence (AI) model DeepSeek among mainland China insurance companies has the potential to enhance operational efficiencies for small to medium-sized carriers, though it also introduces risks, according to AM Best.
Several insurers in China have announced the deployment of DeepSeek in their operations.
In a new commentary, AM Best views the adoption of DeepSeek as credit neutral for China’s insurance industry in the short term.
AM Best noted that DeepSeek could benefit insurers’ business profiles by providing affordable access to advanced technology and enabling competitive niche advantages. Its lower cost and open-source features may also help smaller insurers reduce operational expenses.
Lucie Huang, Senior Financial Analyst at AM Best, said, “DeepSeek could help China’s smaller insurers become more competitive and narrow the technology gap between them and larger players.
“Other positives for companies’ business profiles could include higher revenue growth, improved data analytics and better customer experience.”
However, AM Best cautioned that DeepSeek could negatively impact insurers’ enterprise risk management (ERM) due to AI-related risks and data privacy concerns.
The impact on operating performance will depend on how well companies execute their innovation strategies, AM Best added.
Carriers that fail to identify AI-related risks or establish appropriate risk frameworks may face challenges, particularly regarding regulatory compliance, execution risk, and model risk.
DeepSeek’s effect on insurers’ operating performance could also be mixed, as heavy investments in systems, talent, or processes without clear returns could dampen performance.
Huang continued, “Outcomes will largely depend on insurers’ ability to allocate resources strategically and in proportion to their operational scale and financial capacity.
“Insurers that successfully execute their innovation strategies and manage the balance between short- and long-term profitability will be better positioned from a credit perspective.”
