AI’s integration into the insurance industry could leave some consumers uninsurable, cautioned Nikhil Rathi, FCA’s chief executive.
- Rathi addressed the potential discriminatory risks of AI in financial services at a recent conference.
- The use of AI for creating hyper-personalised insurance plans may lead to increased discrimination.
- The FCA advocates for a balanced approach, valuing both innovation and consumer protection.
- Public acceptance of AI-driven practices remains a significant challenge.
Nikhil Rathi, the chief executive of the UK’s Financial Conduct Authority (FCA), has raised concerns over the incorporation of artificial intelligence into the insurance sector. He warned that while AI has the potential to generate ‘hyper-personalised’ insurance plans, it could also risk leaving some consumers ‘uninsurable’ due to elevated levels of discrimination. Speaking at the StepChange Connected conference in Leeds, Rathi emphasised the importance of having an open dialogue about the risks and trade-offs associated with AI technologies in financial services.
While highlighting the advantages AI can offer, such as the use of anonymous chatbots by an Edinburgh-based fintech for debt advice, Rathi noted the necessity for a ‘safe and responsible’ utilisation of AI. He stated, ‘We want safe and responsible use of AI to drive beneficial innovation.’ However, he expressed caution towards the technology’s potential to disadvantage certain consumer groups through AI-driven hyper-personalised premiums.
Rathi acknowledged the uncertainty surrounding the full extent of AI’s benefits, but referenced experiences from other sectors which indicate that addressing foundational issues could have significant impacts. He posed a critical question: ‘Do we accept that the risk of a few experiments failing or some people not benefiting from innovation is outweighed by the potential benefit to the majority of consumers, and long-term growth and productivity improvements?’ This highlights the dilemma of pursuing technological advancement while ensuring fairness.
Moreover, Rathi pointed out the broader public reception challenges faced by AI-driven solutions by citing the recent controversy over dynamic pricing for concert tickets. This instance illustrates that technological capabilities, although feasible, may not always align with public approval. The FCA encourages a balance between embracing innovation and maintaining consumer confidence and protection.
The FCA insists on a cautious and balanced approach to AI in insurance, ensuring innovation does not come at the cost of consumer fairness.
