All Aboard for Modernisation: Next Stop Underwriting - Paper - Page 31
Technology alone can’t help insurers answer crucial
questions such as:
• Who is responsible for the decisions AI makes?
• How, and at what point in the process, are those
decisions made?
• What impact have those decisions had on the
products and services delivered?
• How do the decisions AI makes contribute to
delivering fair value to customers?
These are all crucial questions, but technology can’t
answer them because technology is creating them.
Increasing regulatory pressure
The regulation of AI is covered through existing
legislation such as the GDPR and the Data Protection
Act 2018, while the Digital Regulation Cooperation
Forum (DRCF), comprised of regulators like Ofcom, the
Information Commissioner’s O昀케ce, and (of course)
the FCA, has a degree of oversight.
This oversight is likely to increase with the
introduction of the EU AI Act, which has largely been
framed around the ethical use of AI. While the UK is
no longer bound by EU rules, UK insurers are likely to
have to broadly adopt the detail, in the same way they
did with GDPR.
Technology is answering the immediate reporting
problem this oversight delivers but, in the process,
it is creating new regulatory demands. If the sector
keeps turning to technology, the regulatory pressure
will only increase.
The answer to the question is, of course, process.
Complying with regulation will ultimately help a
business ensure it is regularly and consistently
meeting customers’ needs while treating them
fairly; but if the reporting isn’t properly managed,
it can act as an obstacle and have a chilling e昀昀ect
on operations.
The general response from insurers is to meet every
regulatory change with a project approach, treating
each development as a separate problem to be
solved and, more o昀琀en than not, technology has been
viewed as the answer. However, by building reporting
requirements into business processes, regulation –
both existing and new – becomes less of a problem to
manage, and more of an in-built sense check of how
well a business is meeting customer needs.
“In an increasingly hybrid regulatory
environment, we will see greater use
of the carrot and stick approach.
Insurance companies should see the
process of modernisation as their
carrot. If processes are improved and
the business is modernised, then the
regulator ceases to be seen as a stick.
Insight is the key and much of that
can be secured by having the correct
processes in place.”
Dan Martin
Altus Consulting
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