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AI will 'soon be everything, everywhere, all at once'

Technology investor says the sooner re/insurers adopt AI, the better their future looks

Within the next five years, every company will be an AI company, or face being squeezed out by those that are, Sands Capital Ventures managing partner predicts

All successful companies will be fully engaged with artificial intelligence (AI) within the next few years, Scott Frederick, managing partner of Sands Capital Ventures, has predicted.

Sands Capital manages about $50bn in investment globally, of which $48bn is in the public market, but over the past seven years, it has been “moving downstream”, Frederick told delegates at the Bermuda Risk Summit. It invests in “series A and B” technology companies, meaning those with $5m or less in revenue.

“We're not afraid of early, and we're not afraid of risk. What we think we do well, are areas like artificial intelligence and cyber security. I'm a raging bull when it comes to AI, which I think will have as transformative an impact as the internet or electricity did. I know that's a bold statement, but I'll harken back to when I started in venture capital, in 1999, when we used to have a separate bucket for ‘internet companies’. That sounds completely trite now because every company is an internet company. And I'd argue that, in three to five years, every company will be an AI company, and if it isn’t, it will get beaten by those that are.”

Frederick encouraged delegates to try out, if they had not done so already, ChatGPT, the AI chatbot launched by OpenAI in November 2022. This is built on top of OpenAI's GPT-3 family of large language models and has been fine-tuned using both supervised and reinforcement learning techniques.

ChatGPT is the “media darling in the zeitgeist at the moment” and is “enormously powerful”, Frederick said.

He also highlighted DALL·E, the 12-billion parameter version of GPT-3 that is trained to generate images from text descriptions.

“I think the implications of AI for insurance are going to be staggering. You can literally type in whatever you want it to generate for you, in whatever style, and what I think you all need to be aware of, is it's going to power incredibly realistic deep fakes,” Frederick said.

Sands Capital is one of the investors in Brightflag, the AI-powered legal spend management and matter management platform.

'I'd argue that, in three to five years, every company will be an AI company, and if it isn’t, it will get beaten by those that are'

Scott Frederick, Sands Capital Ventures 

“Brightflag uses AI for sorting through legal documents, which I think would have huge ramifications for the insurance industry, since you can literally put in hundreds of thousands of legal documents, and it'll summarise clauses that are different,” Frederick said.

Sands Capital has also invested in companies using AI for customer service, which uses the chatbot concept, and in companies that are using AI for healthcare fraud, which Frederick said is another “ideal application” for insurers.

“You feed it 10 to 20 years of CMS data, and it's going to identify fraud that humans just can't,” he said.

One of its recent investments is in Credo AI, which he described as an “ethical or responsible AI-governed platform”.

“I spend a lot of time consulting with the Fortune 500, trying to figure out where they want to go with technology. One of the things I’ve learned is that companies have algorithms they want to operationalise, and they're not sure how to do it, they're terrified by risk, and they're terrified by coming legal changes. So, Credo AI is a platform to help big companies operationalise.”

AI is going to impact, not only every company, but almost every aspect of what any given company is doing, Frederick said.

“I don't think many people are going to lose their job to AI, but you could certainly lose your job to somebody who's better at leveraging AI than you are,” he said.

He stressed that the development of AI is evolving all the time, highlighting that a fourth version of ChatGPT will be released soon. That has been estimated to be more than “100 times more powerful” than the third version.

“They don't make this public but the best estimates I've heard are that it has been trained on 17 trillion parameters,” Frederick said.

“The CEO of technology company Nvidia is on the record saying that, in 10 years, these algorithms will be a million times more powerful,” he added.

On the current, difficult economic climate, Frederick said he was “more comfortable” now that companies were better focused on margins and profitability.

Quoting Ayrton Senna da Silva, the late Brazilian racing driver, Frederick said: "'It's tough to pass a bunch of cars in sunny weather, but when it's raining, you can pass 15 to 20'. I tell my companies to take advantage of this bad environment because those that are really well run, they're going to pass and lap a lot of their competitors."

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