AI Ethics and Life Insurance: Balancing Innovation with Access

AI Can Support a Better Life Insurance Industry

In the life insurance industry, risk-based underwriting helps insurers price products properly by assessing individuals’ risk profiles and assigning them appropriate premiums. New AI-enabled underwriting tools enhance this process by integrating big data and sophisticated analysis that is beyond the reach of human underwriters. 

These models have the potential to expand access to life insurance products by helping insurers understand new markets and build products tailored to their needs. 

However, the opaque nature of these tools creates the risk that they may unintentionally discriminate against protected classes. 

For example, an AI system may use criminal records data to support underwriting decisions. However, the criminal justice system has a history of bias, imposing harsher penalties on Black and Hispanic perpetrators compared to white offenders committing the same crimes. Thus, the AI system could inadvertently use criminal history as a proxy for race, with discriminatory outcomes.

Seizing the Benefits, Avoiding the Risks 

In work commissioned by The American College Cary M. Maguire Center for Ethics in Financial Services, researchers propose three tactics to help life insurers take advantage of the benefits of AI-enabled underwriting while avoiding its potential pitfalls. 

Start with Trust

Trust is crucial in life insurance, and AI-enabled underwriting can make maintaining trust more difficult. To promote trust: 

• Consider the impact of AI systems on communities. 
• Focus on accountability and ensuring that all stakeholders focus on the higher purpose of life insurance. 
• Tackle problems with “explainability” so that consumers can better understand AI-enabled underwriting decisions.

Corporate Culture is Key

Ultimately, decisions related to technology and AI implementation are no different than other important corporate decisions, and similar processes and approaches are demanded. Corporate decisions should be made within the context of a strong, ethical culture. 

Transparency and openness are key, and leadership should be receptive to feedback. Employees on data science teams should be encouraged to think about ethical issues and speak up when they see problems. 

Above all, human judgment should continue to play a role in evaluating and managing AI-enabled systems.

Industry-wide Standards Can Support Ethical Outcomes

By standardizing legal and regulatory frameworks, life insurers, self-regulatory bodies, and state and federal regulators can help mitigate some of the risks associated with AI-enabled underwriting. Industry-wide standards that fill the gaps in current rules by directly addressing the use of AI would help insurers develop their internal policies and would support audits of AI systems and their outputs. Proper regulation and oversight would help enhance trust in these systems, benefiting both consumers and the life insurance industry. 

To learn more about how the insurance industry can ensure that AI-enabled underwriting enhances life insurance products without increasing discrimination, download the research now.