What the EU AI Act means for the insurance industry

by | Sep 13, 2022 | Technology

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Artificial Intelligence (AI) is being put to work across the insurance industry, providing insurers with a powerful edge in working more efficiently and improving customer-facing services. AI advancements are also helping insurers make better use of the growing volume of data. From visual to sensor data, AI enables real-time data analysis to improve everything from underwriting decisions and claims settlements to fraud detection and prevention.

According to Mckinsey, 25% of the insurance industry will be automated in 2025, thanks to AI and machine learning (ML) techniques, helping companies generate significant cost savings. Juniper Research forecasts that across property, health, life and motor insurance, the annual cost savings will exceed $1.2 billion by 2023, a five-fold increase over 2018.

These savings are also being passed on to consumers, as insurers are able to provide more customized, accurate and competitively-priced products and services. However, as the use of AI in the insurance sector continues to rise, so do the concerns surrounding AI transparency and explainability.

Coming soon: The EU AI Act

In April 2021, the European Commission presented a draft for a new EU AI Act, which outlined rules for the development, commodification and use of AI-driven products and services. The legislation will cover any company operating within the EU and in any industry. 

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The EU AI Act introduces a framework to group AI systems into four categories based on the application’s level of “risk.” The goal is to encourage the development of responsible, trustworthy AI systems, starting from the first line of code. It will also prohibit the use of AI applications that creat …

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