CII Calls for AI Regulation in Financial Services
The Chartered Insurance Institute (CII) has recently issued a call for clear accountability frameworks and a sector-wide skills strategy to guide the use of artificial intelligence (AI) in financial services. This recommendation was submitted to the Treasury Select Committee (TSC), highlighting the necessity for both individuals and institutions to remain accountable for decisions driven by AI systems.
Accountability and Responsibility
The CII emphasizes that professionals must be prepared to take responsibility for the outcomes of AI applications, whether through their design or ongoing monitoring. This approach aims to ensure that both individuals and institutions are held accountable for the actions of their algorithms, regardless of the complexity involved in explaining how those algorithms reach their conclusions.
To promote transparency, the CII advocates for mandatory validation and testing of AI systems to assess the potential for discriminatory outcomes. The results of these assessments should be made publicly available to enhance trust and accountability within the industry.
Regulatory Oversight and Training Recommendations
The organization suggests that regulatory oversight of AI in financial services should adopt a proportionate approach. All staff within regulated firms should receive training on the opportunities and risks associated with AI use. This training aims to empower firms to deploy AI effectively while maintaining consumer protection standards.
AI Regulatory Developments
Accountability in the use of AI within the insurance and reinsurance sectors has garnered significant attention from regulators, industry stakeholders, and policymakers. The rapid integration of AI technologies into various insurance operations, including underwriting, claims processing, and customer service, has prompted this focus.
Internationally, the European Union’s Artificial Intelligence Act (AI Act) came into force on August 1, 2024, with phased implementation expected over the next 24 to 36 months. This act establishes a common regulatory and legal framework for AI within the EU, classifying AI systems based on risk levels—unacceptable, high, limited, and minimal. Stricter regulations apply to high-risk AI technologies utilized in sectors like healthcare and law enforcement.
In the UK, the Financial Conduct Authority (FCA) has expressed concerns that the use of AI in insurance could result in some individuals becoming “uninsurable” due to hyper-personalization and potential discrimination.
AI’s Impact on Insurance
The submission from the CII references findings from its long-running Public Trust Index, which assesses consumer attitudes towards the insurance sector. It highlights that AI has the potential to enhance key areas valued by consumers and small and medium-sized enterprises (SMEs)—specifically cost, protection, usability, and confidence.
To support its governance recommendations, the CII points to existing resources, including the Digital Companion to the Code of Ethics and guidance on addressing gender bias in AI. These tools are designed to assist professionals and organizations in adopting responsible AI practices.
In conclusion, the CII’s call for AI regulation underscores the importance of ongoing evaluation and accountability in the integration of AI technologies within the insurance sector. By fostering a culture of responsibility and transparency, the industry can better serve both professionals and consumers alike.
What are your thoughts on this story? Please feel free to share your comments below.
