The Ethical Aspects of Big Data and AI in the Insurance World: An Analysis from the Central Bank of Ireland. What risks arise and how do insurance companies deal with them?

The Ethical Aspects of Big Data and AI in the Insurance World: An Analysis from the Central Bank of Ireland. What risks arise and how do insurance companies deal with them?

According to a report by paymentandbanking.com, the use of artificial intelligence and big data in the insurance industry is steadily increasing. Insurance companies are increasingly using these technologies to optimize and automate processes. But the question arises about the ethical use of big data and AI in the insurance industry.

The Central Bank of Ireland has published research on “Data Ethics Within Insurance” which highlights the importance of data ethics in the insurance industry. Data ethics deals with moral principles in data processing and use and seeks solutions to ethical challenges.

The study shows that insurance companies are already relying heavily on AI and big data, particularly in the areas of pricing, underwriting, sales, distribution, marketing, product development and claims management. However, many companies neglect the aspect of data ethics. Most companies neither have explicit definitions of data ethics nor specific policies in this area.

This raises further question marks as the use of AI and analytics models in the insurance industry occurs without enterprise-wide model inventory and model risk processes. This poses clear risks for the insured, including the endangerment of the solidarity and pooling principle, lack of explainability of decisions, marginalization and exclusion of customers, as well as discrimination and unfair treatment.

As a business expert, it is important to understand that a failure to address data ethics not only endangers those insured, but also exposes insurers themselves to significant risks. It is therefore urgent that insurance companies establish data ethics measures and strategies to ensure ethical principles and fair decisions. Neglecting data ethics could not only result in lost customers, but also violate applicable laws, which can be costly. It’s time to take a hard look at data ethics in the insurance industry.