On 14 August, members of the US-based non-profit organisation the NAIC agreed to adopt a set of AI principles developed by the Organisation for Economic Co-operation and Development (OECD). These principles have been adopted by 42 countries, including the US.
According to regulators and consumer groups, these new guiding principles are crucial for the ongoing development of AI-based insurance systems, as they ensure that insurers and other entities do not use these systems to hide illegal forms of discrimination, for example.
In line with this, the NAIC’s AI Working Group developed a set of five key tenets, which can be summarised with the acronym FACTS, to ensure that all AI-based insurance systems implemented by its members are:
- Fair and ethical, respecting the rule of law and implementing trustworthy solutions;
- Accountable, acknowledging responsibility for the creation, implementation and impacts of any AI system;
- Compliant, with knowledge and resources in place to comply with all applicable insurance laws and regulations;
- Transparent, maintaining a commitment to responsible disclosures regarding AI systems to relevant stakeholders as well as the ability to inquire about and review AI-driven insurance decisions; and
- Secure/safe/robust, ensuring a reasonable level of traceability of datasets, processes, and decisions made and implementation of a systematic risk management process to detect and correct risks associated with privacy, digital security, and unfair discrimination.
On its website, the NAIC explains that in drafting the principles, the Working Group studied the development of artificial intelligence, its use in the insurance sector, and its impact on consumer protection and privacy, marketplace dynamics, and the state-based insurance regulatory framework. The group also solicited comments from key stakeholders. As part of the ‘fair and ethical’ tenet, NAIC members added a principle encouraging industry participants to take proactive steps to avoid proxy discrimination against protected classes when using AI platforms.
“The vast amounts of data and ever-expanding computing power is accelerating the use of AI within the insurance industry. And while this tool can greatly aid businesses across the sector, it also raises new challenges to be addressed, including consumer privacy and safeguards to protect against unintended discrimination that may be built into algorithms,” said Jon Godfread, North Dakota Insurance Commissioner and Chair of NAIC’s AI Working Group. “These principles are aspirational guideposts for the industry to ensure the technology is used effectively and responsibly – to help insurance organisations and professionals continue to innovate while protecting the consumer.”