Cover Genius CRO: Lack of AI regs is insurtech’s ‘biggest challenge’

A lack of formal regulation of AI usage in insurance is one of the biggest challenges facing the American insurance industry today, according to Darcy Rittinger, chief risk officer, Cover Genius.

“I think the biggest challenge that we have now as an industry is a lack of regulation,” said Rittinger, noting that firm federal regulations do not seem to be forthcoming from the current administration.

However, she emphasized this should not be used as an excuse to shirk standards. Rather, she urged companies to perform due diligence not just out of ethical considerations but because it will build trust with consumers.

Indeed, Rittinger expects client demand rather than outright regulation to inform insurance AI standards going forward, as customers question core principles like bias, transparency and explainability.

“I don’t think that this should be viewed as an opportunity to have a free-for-all. What’s going to happen is you’re going to have consumers who now, in the lack of clear guidance and regulation or enforcement, are more confused than ever… I think consumer demands are going to drive action more than regulation during the course of this administration,” she said.

‘Aversion’ to regulation

Rittinger noted that when she last spoke with InsuranceNewsNet some six months ago, AI regulation was slowly but certainly being developed. By now, however, many of those developments no longer exist.

“We are seeing a rollback on a lot of these regulations,” Rittinger said.

Additionally, she noted that both the U.S. and the UK declined to sign a recent Paris AI summit final statement — even though that statement, in her opinion, “lacked a lot of teeth” and “left a lot of companies kind of clapping in the wind about what they should do with respect to implementing AI in a responsible manner.”

“There certainly seems to be an aversion to the implementation of new regulation and the enforcement of regulation,” Rittinger said. “I don’t anticipate, at least, the kind of consumer protection regulation that we were seeing under the last administration happening in the near term.”

Ethical responsibility

Notwithstanding the current uncertain regulatory environment, Rittinger urged American insurtechs to maintain core ethical principles when it comes to AI use.

“Even though there’s no strict regulation around how you use AI in this event, we want to meet those core principles. The best companies, the companies that are going to succeed in this environment, are going to be meeting those core principles,” she said.

Rittinger suggested the ultimate outcome should be a customer-centric solution that provides better products and services for clients, using AI in an ethical way to achieve that.

“We know we need to use it. We know we need to be at the forefront of that innovation, but how do we do that responsibly? That’s going to be the main thing that insurtechs need to focus on — the self-discipline to be responsible about those things in the lack of clear regulatory guidance,” she said.

This could mean performing internal assessments and developing a robust governance structure in-house with proper guardrails to counter inherent biases, thereby implementing technology and innovation that satisfies compliance needs and offers clients transparency.

Consumer-driven standards

Ethical responsibility aside, Rittinger also expects clients themselves will demand some form of regulation or standards from companies they choose to work with.

She noted that the public tends to have such high standards for technology that even one failure can decimate trust. As an example, she pointed to self-driving cars, where even an individual crash is widely reported in the news and immediately turns people away from that technology.

“I think that crosses over into insurtech as well. If you’re making a decision on whether or not I can have an insurance policy, why did you make that decision? How did you make that decision? I think the requirement, the demand of consumers is you need to be able to explain that to me,” she said.

Rather than see this as a conundrum, Rittinger suggested insurtechs leverage it to build trust, thereby improving customer relations.

“I think it’s an opportunity for companies to get on the forefront of this with their own compliance and governance procedures, to make sure that they’re engendering that trust with their customer,” she said.

Respecting the regulatory balance

At the same time, Rittinger noted that regulatory environments are liable to change, and American insurers should be careful about going too far in either direction.

“Administrations come and administrations go, and so we should be very careful about overcorrecting or undercorrecting under any sort of government regime… The rules change constantly, and the companies that are best adept to handle those changes are the ones that can meet those different regulatory demands and needs,” she said.

Cover Genius, founded in 2014, is a global insurtech provider offering tech-powered insurance solutions and software. One of America’s leading insurtechs, it has more than 600 employees around the world and reported 107% year-on-year growth in 2023.

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Rayne Morgan is a journalist, copywriter, and editor with over 10 years' combined experience in digital content and print media. You can reach her at [email protected].