AI is Already Reshaping the Insurance Industry: How should regulators respond?

A new report from The Geneva Association, an industry-leading international association of insurance companies, explores the expanding use of artificial intelligence (AI) in the industry and country-specific approaches to the regulation of AI in insurance. 

“AI is a vital component of the digital transformation of the insurance industry,” the report states. “It has the potential to provide significant benefits to consumers, firms, and society as a whole, and contributes to improving the availability, affordability, and accessibility of insurance.”

Those benefits do come with risks, the report noted, including the increased potential for bias, unfair discrimination, and exclusion, as well as data security and liability risks.

The Geneva Association offered several approaches to address these risks, and stressed that nearly every concern also exists in traditional insurance.

“These concerns can be addressed by enhancing transparency and governance frameworks around the use of data by AI in consumer-facing applications.” - Geneva Association

Here are some key takeaways from the report: 

• Agreeing on a definition of AI: Acknowledging that “AI” can cover a wide range of concepts and applications, the report offered its own definition of the term: “The ability of machines to conduct tasks requiring human intelligence, including learning, reasoning, problem-solving, and natural language processing (NLP), based on the processing of vast amounts of data for decision-making while learning and adapting through pattern recognition and analysis.”
  
  
• AI can address protection gaps: Because AI allows insurers to examine risks on a more granular level, it can facilitate coverage of risks that were previously deemed too difficult to insure.
  
  
• AI benefits for customers: AI has the potential to offer customers a more efficient purchasing process; tailored and transparent product offerings; more personalized products; and lower premiums due to AI-related cost savings for insurers. 
  
  
• AI benefits for insurers: By incorporating AI into their business processes, insurers can reach underserved populations, improve claims handling, strengthen fraud detection, and achieve efficiencies and lower costs.