Policy discussions surrounding the use of artificial intelligence (AI) in the insurance industry have sparked significant debate. The National Association of Mutual Insurance Companies (NAMIC) recently released an analysis claiming that concerns over AI in insurance are misplaced and could harm policyholders.
The report highlights worries from regulators and advocates about potential discrimination linked to AI. Critics fear that AI could lead to biased outcomes in insurance underwriting and pricing, which might affect the affordability and availability of insurance for certain groups. Currently, 18 states are considering legislation related to AI that NAMIC describes as flawed.
NAMIC argues that the guidance from the National Association of Insurance Commissioners (NAIC) has contributed to confusion about algorithmic bias. Lindsey Klarkowski, NAMIC’s policy vice president, emphasizes that while regulators may have good intentions, their focus on fairness could undermine the fundamental principles of insurance. She warns that this could disrupt the core function of insurance, which is based on sound actuarial science.
Klarkowski authored a report aimed at countering five common myths about AI and data use in insurance. She stresses that insurance operates differently from other consumer products, as it relies on risk assessment. According to her, any regulations affecting how insurers use AI must recognize this unique aspect of the industry. She argues that restricting insurers’ ability to price policies based on risk could lead to more significant issues with availability and affordability.
The report also points out that the data used for pricing in the insurance industry is based on actuarial principles and does not include protected class attributes. Klarkowski asserts that suggesting insurers’ use of data and algorithms is biased contradicts the foundation of insurance laws, which require that risk classifications be fair and sound.
NAMIC warns that if a standard for disparate impact were applied to insurance pricing, it could lead to unfair discrimination. The organization maintains that the industry already complies with legal standards against unfair discrimination.
As discussions around AI in insurance continue, the balance between innovation and fairness remains a critical issue. Insurers are calling for thoughtful regulation that supports their ability to assess risk accurately while also addressing concerns about discrimination.