The proposed AI Act by the European Union carries significant implications for applying artificial intelligence (AI) within the insurance sector. This Act is designed to oversee the use of AI in different industries, including insurance, safeguard consumer interests, and promote the ethical use of AI technologies.

The EU AI Act sets rules for how artificial intelligence (AI) can be used in the insurance industry. Insurers must follow strict guidelines when using AI for underwriting, risk assessment, fraud detection, and customer service. The goal is to ensure that AI is used responsibly, transparently, and without bias.

What is the EU AI Act?

The EU AI Act includes a thorough regulatory framework to control how artificial intelligence (AI) technology is used in different industry sectors within the European Union. The Act aims to establish clear guidelines for the development and implementation of AI systems, with a focus on ensuring transparency, ethical use, and consumer protection.

Main rules of the EU AI Act?

Transparency and Ethics

The AI Act includes strict rules for tech companies using AI. They must tell users when AI is involved, label AI-generated content, and ensure that AI-generated media can be detected. AI used for essential services must also consider its impact on people’s rights.

Flexibility for AI Companies

Companies creating foundation models must document their processes, follow copyright laws, and share information about their training data. The strictest rules apply to the most potent models based on their computing power, and companies must check whether they follow the rules.

EU AI Regulator

The new European AI Office will ensure these rules are followed to lead the world in AI regulation. Companies that don’t comply could be fined between 1.5% and 7% of their global sales. People can complain about AI systems and ask for explanations for AI decisions.

Security Exceptions

Some uses of AI are banned for security reasons. This includes biometric categorisation, untargeted facial recognition, emotion recognition at work or school, social scoring, and behaviour manipulation. AI for military use is allowed. The police can use biometric AI with court approval for specific crimes.

Timeline

The bill still needs to be finalised. Once approved, companies will have two years to begin following the rules. Banned uses will stop after six months, and foundation models have one year to comply with the new rules.

Impact of AI on Insurance Companies

The EU AI Act will greatly impact insurance companies that use AI. These companies must clearly explain how their AI systems make decisions and are responsible for any biases or mistakes in their AI systems. The AI Act will bring big changes to the insurance industry. AI will play a major role in underwriting, claims processing, customer service, and risk assessment. However, with the new rules, insurance companies will have to use AI more responsibly and ethically. This means they must be more open and careful when using AI.

Challenges and Opportunities

The new rules bring both challenges and opportunities for insurance companies. While it may be difficult to meet the strict regulations at first, it also offers a chance for companies to rethink their AI plans, improve their management, and ensure their AI systems follow ethical and responsible practices.

Insurance companies in the EU must prepare for the new AI rules by assessing the impact of their AI systems, creating strong management structures, and ensuring compliance with the regulations. They must also explain how their AI makes decisions, carefully monitor high-risk AI systems, and have oversight mechanisms in place.

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