Ethical AI Drives Insurance Fairness and Better Models
Recent advances in artificial intelligence (AI) have captivated a wide audience, from C-suite leaders to junior staffers, showcasing a variety of applications that range from diagnosing illnesses to planning vacations. However, a critical question arises: how do we ensure that these AI-generated answers are fair and unbiased?
The Importance of Fairness in Heavily Regulated Industries
In heavily regulated sectors like financial services, the issue of fairness and bias becomes even more significant. These services fundamentally influence how individuals navigate their lives, achieve their goals, and protect their loved ones. The consequences of bias and discrimination can be severe, resulting in both financial penalties and reputational damage.
AI’s Role in Calculating Individual Risk Scores
When assessing individual risk scores, AI models leverage a wide range of variables, including socioeconomic and lifestyle factors, as well as external consumer data (known as alternative data) to enhance accuracy. However, AI often lacks transparency in delineating how it establishes relationships between data points and specific demographics.
A report by Infopulse highlights a transformative shift within the insurance industry, noting that 77% of leaders were in the process of adopting AI across various functions in 2024, marking a 16 percentage point increase from the previous year. Despite these advancements, the risk of unfair bias looms large, particularly in relation to unequal pricing and inadequate coverage. Consequently, state regulators in places like Colorado and New York are implementing new regulations governing how insurers utilize AI.
Case Study: Reinsurance Group of America (RGA)
The Missouri-based Reinsurance Group of America (RGA) leverages AI in its predictive models, utilizing extensive data from across the globe to assist carriers in better assessing risks. To enhance client confidence in its methodologies for testing unfair bias, RGA partnered with Ernst & Young LLP (EY US), a firm renowned for its expertise in fairness.
EY US worked with RGA to refine their approaches for testing insurance models, focusing on compliance and the risks of bias and discrimination, while ensuring utility for business purposes. Together, they established a benchmark for responsible innovation.
Developing a Robust Testing Playbook
EY US has a strong reputation in the banking sector for identifying and addressing fairness-related issues, particularly in lending. By combining their expertise with RGA’s knowledge in insurance, they created a comprehensive testing playbook that provides a standardized process for fairness and bias testing. This playbook is pivotal as AI technologies continue to evolve.
The playbook outlines considerations, decision points, and methodologies for testing, which vary by model, and also addresses external consumer data sources, which are attracting regulatory scrutiny. It balances model risk with assessments of fairness across demographics, becoming a core document for RGA in model development, testing, and validation.
Pilot Testing and Future Applications
RGA and EY US piloted this testing on two models—one for individual policies and another for group policies. RGA plans to apply this methodology to all current and future models.
The Growing Interest in Responsible AI
According to the biannual EY US AI Pulse Survey conducted in late 2025, interest in responsible AI among senior leaders across various sectors increased to 67%, up from 61% the previous year. The focus on ethical AI practices is expected to rise further, with 68% of leaders indicating this priority for the coming year.
Conclusion
As the complexity of AI regulations increases, RGA has found a method to enhance client assurance while improving risk assessment within the life insurance sector. The new playbook developed by EY US not only provides guidelines for responsible AI application but also reinforces RGA’s commitment to fairness in its pricing and underwriting processes. This innovation enables RGA to offer more accessible financial protection, helping individuals lead longer and more fulfilling lives.
