Artificial intelligence (AI) and the ever-increasing volume of data (Big Data) are transforming how financial services and products are delivered.  The insurance sector is keen to explore the opportunities that both provide for innovation and gains in efficiency and effectiveness. Indeed, European Insurance and Occupational Pensions Authority (EIOPA) suggested earlier this year that over 30% of European insurers may already be using AI, and it seems likely that Big Data has had at least some impact on all insurers.

Concerns remain, however, about the quality, fairness and transparency of automated decision making, and how the outputs of learning systems can be effectively monitored and challenged. Some of these issues could, if not properly managed, lead to significant reputational risks for both insurers and regulators.

Financial services regulators have to date largely (and deliberately) sought to ensure policy remains technology neutral, while recognising that the use of AI and Big Data will come with challenges. Publications on the topic from a range of financial and-non-financial bodies already show some relatively clear trends in the thinking.  The issues can broadly be grouped under the headings of “governance and oversight” and “fairness”, and this article focuses on those topics.

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Grant Murtagh
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