The White House's Executive Order on Safe, Secure, and Trustworthy AI aims to establish guidelines for responsible AI implementation across industries, including insurance. It mandates regulatory compliance, data privacy, ethical and unbiased AI systems, fostering innovation while mitigating risks. Insurance companies must adapt by enhancing governance, transparency, skilled workforce development, operational efficiencies, and risk management. While posing initial challenges, embracing the standards can boost customer trust, drive innovation, maintain competitiveness, and ensure the ethical deployment of AI for improved services and financial stability.
The extensive evolution of AI and Gen AI has blurred the difference between reality and augmented reality. Preserving the integrity of artificial intelligence and machine learning and Gen AI along with fostering innovation has called for the implementation of appropriate regulation. It is especially crucial in heavily regulated sectors, such as healthcare, banking, financial services, and insurance.
To tackle the situation, the White House has recently issued a groundbreaking Executive Order. This order enables the United States to capitalize on the potential benefits of artificial intelligence while mitigating the associated risks.
Highlights of the Executive Order:
The Executive Order on Safe, Secure, and Trustworthy Artificial Intelligence aims to establish a strong framework that can guide the implementation of responsible AI.
As expected, the order has significant implications for all industries including insurance.
Let’s see the various ways it is going to affect the insurance sector.
EXAMPLE – Property and Casualty (P&C) insurers, who are using AI for claims processing, will need to check if their system:
IMPLICATIONS: Due to a strong regulatory environment, insurance companies will face more stringent compliance demands. Consequently, it will increase expenditure in compliance and governance.
EXAMPLE – A Life and Annuities (L&A) insurer using customer health data to estimate policy rates. In response to the new standards, the insurer will be obliged to enhance its data security measures to protect sensitive information.
IMPLICATIONS: Insurers will prioritize data protection which will subsequently increase cost. However, it will also strengthen customer trust.
EXAMPLE – A P&C insurer discovers unintentional algorithm bias within its AI-based underwriting system that would adversely affect certain demographic groups. To conform to the Executive Order, the company must rectify this issue at once.
IMPLICATIONS – Insurers will need to acquire tools and implement practices aimed at detecting and mitigating bias within their AI systems. It will ensure impartial treatment for all customers.
EXAMPLE – An L&A insurer embraces the new AI standards to develop innovative, personalized insurance products to gain a competitive edge in the industry.
IMPLICATIONS – Insurers that proactively adapt to new standards and leverage AI responsibly can boost their market standing and drive innovation.
EXAMPLE – A P&C insurer providing its customers with concise details regarding AI’s role in claims processing. This in turn enhances transparency and builds trust.
IMPLICATIONS – An emphasis on transparency, effective communication, and social responsibility. All this will eventually result in enhanced customer trust, customer retention, and business growth.
EXAMPLE – An L&A insurance company invests in training programs to upskill its workforce in AI ethics & secure AI practices. The company aims to ensure compliance with the Executive Order.
IMPLICATIONS – The insurance sector will require attracting a workforce that is well-versed in AI, ethics, and cybersecurity.
EXAMPLE – A Property and Casualty insurer which has incorporated secure and trustworthy AI systems for risk assessment. The goal of the company is to reduce claims processing times and enhance operational efficiency.
IMPLICATIONS - Although compliant AI systems entail initial costs and challenges, the long-term benefits, like increased operational efficiency and cost savings, outweigh the downsides.
EXAMPLE – An L&A insurer which uses AI to boost risk modeling so that the company can get more accurate life expectancy predictions and better financial stability.
IMPLICATIONS – Effective risk management via secure and trustworthy AI will result in improved financial stability. However, insurers will need to navigate and mitigate the risks involved in AI deployment.
EXAMPLE – A Property and Casualty insurer who is deploying an AI-based underwriting workstation. The goal of the company is to enhance the efficiency of underwriters.
IMPLICATIONS – On one hand, AI recommends engines for actions, risk assessment, and prioritization which further improve the efficiency of underwriters. On the other hand, the compliance team of the company needs to maintain ongoing vigilance to ensure that the usage of AI aligns with the standards and regulations.
EXAMPLE – A Property and Casualty carrier which offers insurance for regulated products, such as auto and home. The regulatory body, a government entity overseeing these products, prescribes the standards the carrier must adhere to.
IMPLICATIONS – Government entities will provide clear guidance on AI usage for regulated products.
To sum up, the Executive Order on Safe, Secure, and Trustworthy Artificial Intelligence will have far-reaching implications in the P&C and L&A insurance sectors. While it poses challenges in terms of compliance, data protection, and bias mitigation, it also presents opportunities for innovation, operational efficiency, and building customer trust. The success of insurers in adapting to these changes will depend on their commitment to responsible AI practices.
At Coforge, we value and practice responsible use of Cognitive and AI. We have been successfully collaborating with our clients to construct their AI frameworks and Centre of Excellence. Keeping up with this custom, Coforge has launched an innovative AI framework called Quasar that empowers organizations in scaling their AI capabilities responsibly.
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