ICA outlines path for AI in Australian insurance industry
ICA outlines path for AI in Australian insurance industry | Insurance Business Australia
Technology
ICA outlines path for AI in Australian insurance industry
Submission released amid innovation and regulatory changes
Technology
By
Roxanne Libatique
The Insurance Council of Australia (ICA) submitted its perspective on the integration and regulation of artificial intelligence (AI) within the general insurance sector.
The general insurance sector is a pivotal part of Australia’s economy, employing about 60,000 workers, generating an annual gross written premium of $64.5 billion, and paying out approximately $147 million in claims every business day, amounting to $36.5 billion yearly.
Advantages and disadvantages of AI in insurance
The ICA’s submission highlighted both the advantages and potential pitfalls associated with AI in insurance.
It said AI can significantly streamline operational efficiency and customer service. By reducing costs linked to claims processing and risk evaluation, AI can also make insurance more affordable.
“Insurers’ internal risk management frameworks complement existing regulation that covers their use of AI technologies. This regulation includes consumer protection and privacy legislation as well as parts of the financial services regulation regime,” it said. “Strengthening protections around AI must start with sharpening or otherwise adjusting existing regulatory frameworks. Any consideration of new legislation must be based [on] a clear cost benefit analysis and comprehensive regulatory impact statement that identifies a regulatory gap.”
On the downside, the use of AI brings major risks. For example, there is potential for AI to be used in fraudulent activities such as manipulating photos to exaggerate insurance claims or crafting fake identities. There are also concerns about the unintentional exposure of sensitive information through public AI platforms.
“The use of generative AI to augment photographs that are in turn, used to fraudulently inflate insurance claims. Similarly, AI could be used for voice spoofing, email phishing, or synthetic identity fraud,” the ICA said. “Commercial sensitive data such as proprietary information uploaded to a public AI model may then be shared elsewhere by the model. Similarly, prompt engineering used to train an AI model could potentially reveal sensitive information in situations where it should not otherwise be available.”
ICA’s recommendations for fostering responsible AI industry
The ICA suggested refining existing regulatory frameworks to enhance AI governance, rather than imposing new laws without a clear analysis of costs and benefits. It stressed the importance of identifying gaps in current regulations, which cover consumer protection, privacy, and parts of the financial services regulatory regime.
“Even if the regulatory environment is optimised for Australian firms to deploy AI, there is work to be done to ensure the broader operating environment allows for Australian firms to capitalise on AI advancements. This includes the build-up of Australia’s sovereign AI capabilities,” it said.
Furthermore, it emphasised the importance of boosting Australia’s autonomous AI capabilities to reduce dependence on external AI solutions, which could lead to economic vulnerabilities.
The ICA advocates for a regulatory environment that both leverages AI advancements and protects consumers, thereby maintaining trust in this rapidly evolving sector.
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