Call for regulatory evolution to support AI use without stifling innovation

The managing director of the Geneva Association has said the regulatory regimes for risk and insurance across the world need to evolve with the increased use of AI, adding it cannot be at the expense of the ability of the industry to innovate.

The Association has issued a new report examining  the evolving AI regulatory landscape for insurers. The report analyses the varying approaches to AI regulation and explores their impact on the insurance industry. Taking stock of these developments, the report provides key considerations for regulators and policymakers that encourage innovation while ensuring adequate protection for customers. In particular, it finds that existing, technology-neutral insurance regulatory frameworks can be leveraged to manage AI-related risks specific to insurance, whereas cross-sectoral regulation could hinder innovation.

The report said Industries across a variety of sectors are embracing artificial intelligence (AI) for improved services, efficiency and costs. In insurance, AI is reshaping business processes, from underwriting to claims management and customer engagement. AI also has the potential to enhance the value of insurance to society by enabling protection and mitigation services.

“Despite the benefits AI offers to both customers and insurers, however, there are concerns around privacy and the risk of potential discrimination, as well as the lag between the pace of development of AI technologies and corresponding regulatory frameworks,” it added. “The recent emergence of more sophisticated generative AI tools has exacerbated these concerns and spurred a number of regulatory initiatives in several jurisdictions.”

Jad Ariss, managing director of The Geneva Association, explained: “An AI-enabled approach to doing business allows insurers to offer more personalised products, and improved efficiency and costs may make insurance more affordable and attractive. Regulatory frameworks need to evolve in tandem, however, to ensure ethical, accountable and equitable use of AI technologies, without hindering insurers’ ability to innovate. The fast-moving nature of AI developments makes this challenging but a balanced approach to data governance with a focus on customer outcomes will help promote innovation in a fair manner.”

His views were backed by Dennis Noordhoek, director Public Policy & Regulation at The Geneva Association and author of the report.

“Though certain risks, such as compromised data privacy and potential discrimination, may be heightened by the growing use of AI in insurance, these risks are not new,” he explained. “Accordingly, they are already captured by existing regulatory frameworks, which can be built on and tailored to the use of AI in insurance. Also, as highlighted in the report, coherent approaches across jurisdictions would go a long way to helping insurers navigate the challenges and opportunities related to AI more effectively.”