AI comes with great promise (and ethical risks) for the insurance industry

NASHVILLE – Artificial intelligence has powerful potential, which can be classified as good or bad. Insurance is among the industries likely to be most transformed.

Still, there remains a hesitancy to dive into the technology. A LIMRA survey revealed the tentative industry approach to AI, CEO Dave Levenson noted:

One certainty is that AI is here to stay, and LIMRA made sure to acknowledge this during its 2024 Annual Conference. In addition to Levenson's opening comments on AI, several breakout sessions were devoted to the topic, along with a main-stage general session featuring three experts on the topic.

"I think when you deal with new technologies like artificial intelligence, it's really important to that everybody understands what are the good things that technology can do, what are the dangerous things that technology can do," Levenson said in a pre-conference interview.

LIMRA research found a wide range of attitudes and plans for the incorporation of AI into operations such as underwriting.

In an effort to better regulate itself, LIMRA helped the industry form a committee comprised of nearly 80 executives representing over 40 U.S. insurance companies. The LIMRA and LOMA AI Governance Group aims to "create a foundation for sustainable and inclusive AI practices to improve the life insurance industry."

Its first study, "Navigating the AI Landscape: Current State of the Industry," was completed earlier this year. It found that 100% of carriers are experimenting with or using AI in some form.

Ethical use of AI

The ethical use of AI and big datasets continues to drive debate, and in some cases, lawsuits, in the insurance world. While access to massive amounts of data can fine-tune underwriting, it can also discriminate against some demographic groups.

"Really what we worry about when we are building these models is, where is all this data coming from?" said Derek Leben, president of Ethical Algorithms and associate teaching professor of ethics at the Tepper School of Business at Carnegie Mellon University. "Do people have control and ownership and a say over how their data is used? Do we understand how and why models are making these decisions?"

Leben participated in the general session titled, "AI: How Is It Powering the Future?"

Consumer advocates are looking to the National Association of Insurance Commissioners to regulate the use of AI. But work on AI and privacy protections is progressing at a deliberate pace, with the Privacy Protections Working Group attempting to create a new privacy model regulation for the states to consider for adoption.

The NAIC adopted the Model Bulletin on the Use of Algorithms, Predictive Models, and Artificial Intelligence Systems by Insurers during the association's December meeting.

Leben told a LIMRA audience that "the regulations we need are already on the books" around topics such as product safety liability and discrimination.

This year, Colorado became the first state in the nation to enact a comprehensive law covering the use of AI. The law requires businesses that use AI to “use reasonable care” to protect consumers from discrimination.

One way to avoid trouble and stay ahead of the regulators is with strong in-house governance over the use of AI.

"Companies can and should build detailed ethics policies around their predictive systems and their generative systems," Leben said. "They should get as detailed as possible."

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