December 24, 2018

The insurance industry will start to develop an ethical framework for AI

Speed and scale of AI’s global deployment must be addressed now.

2018 was the year in which the insurance sector really grasped the potential of artificial intelligence (AI) and machine learning. Consequently, 2019 will be the year in which the industry realises it needs to address the ethics that govern how AI operates and evolves.

Consider the human brain. It is a fantastically powerful thinking machine. To harness its computational abilities for social good, humanity developed a system of ethics to guide and manage its operation. That same philosophical scaffolding is now urgently needed to support the growth of AI.

The insurance industry needs to consider three specific perspectives on the topic: how it will use AI, how its customers will use AI and what part AI will play in future claims. If we consider just the first of these – how insurers will use AI – it's becoming apparent that hyper-personalised underwriting could improve insurers' financial performance, at least in the short term, but at the expense of traditional risk-pooling.  This would create a class of risks that are effectively uninsurable and ultimately undermine the key societal role played by insurance. This in turn would likely affect the way in which the industry is regulated.

Unless they wish to have a code of ethics imposed on them by government and the courts – a prospect now facing the tech giants – insurers must make a concerted effort to get on the front foot. This means putting in place a clear process and infrastructure for developing and testing ethical principles.

You can read the rest of our insurance predictions here.