Regulatory body EIOPA lays out guidelines for overseeing artificial intelligence applications within the insurance industry.
EIOPA Issues Guidance on AI Use in Insurance Industry
The European Insurance and Occupational Pensions Authority (EIOPA) has issued new guidance clarifying how existing sector rules apply to the use of artificial intelligence (AI) in the insurance industry. The guidance aims to provide clarity to supervisors, market participants, and insurance companies on the application of these rules in the context of AI.
The guidance takes a risk-based and proportionate approach, balancing the benefits and risks of AI systems across the insurance value chain. This includes pricing and underwriting, claims management, and fraud detection. EIOPA's approach reinforces principles like data governance, record-keeping, fairness, cybersecurity, explainability, and human oversight.
The Insurance Distribution Directive and the Solvency II Directive, which provide broad, technologically neutral governance and risk-management principles, are highlighted as a sound approach for integrating AI-based tools in the insurance industry.
Notably, the EU's AI Act, which came into force in summer 2024, regulates the use of AI in all sectors, including insurance. AI used for risk assessment and pricing in life and health insurance is classified as "high-risk" under the EU's AI Act and must meet stringent requirements. However, EIOPA's sector-specific rules cover broader governance and risk principles that complement the AI Act without overlap.
It is important to note that AI systems categorized as high-risk or prohibited under the EU's AI Act are excluded from the scope of the EIOPA's guidance. The guidance is intended to help supervisors interpret existing sector rules in the context of AI, foster greater supervisory convergence among National Competent Authorities, and provide clarity to market participants on supervisory expectations.
EIOPA plans to further develop detailed thematic analyses and guidance on emerging AI issues in insurance in the coming years. This will help ensure that the insurance industry continues to operate responsibly and effectively in the era of AI.
In summary, EIOPA sees current insurance regulation as a "sound approach" to integrating AI tools responsibly, emphasizing that AI oversight should be risk-based, proportionate, and focus on transparency and human control within the existing legal framework.
The European Insurance and Occupational Pensions Authority (EIOPA) encourages the finance sector, particularly insurance businesses, to consider the risks and benefits of using AI systems in their operations, emphasizing key areas such as pricing and underwriting, claims management, and fraud detection. To support this, EIOPA references existing directives like the Insurance Distribution Directive and the Solvency II Directive as a practical basis for integrating AI-based tools, while also acknowledging the EU's AI Act, which governs the use of AI in all sectors, including insurance. Moreover, EIOPA intends to provide further support to ensure responsible AI usage within the insurance industry through detailed thematic analyses and guidance on emerging AI issues in the coming years.
