New European AI law to impact insurance
Source: Middle East Insurance Review | Apr 2024
The insurance and banking sectors will be required to carry out an impact assessment to ensure their use and development of AI protects the fundamental rights across Europe.
The European Artificial Intelligence Act is driving new levels of human oversight and regulatory compliance for AI within the EU. Similar to GDPR for privacy, the EU AI Act has potential to set the tone for upcoming AI regulations worldwide.
The Act protects citizens’ rights, democracy, the rule of law and environmental sustainability from “high risk” AI.
The AI Act will also ban certain applications, including biometric categorisation systems that use sensitive characteristics based on political, religious and philosophical beliefs, as well as sexual orientation and race.
Also outlawed are - untargeted scraping of facial images from the internet or CCTV footage to create facial recognition databases; emotion recognition technology in the workplace and educational institutions and social scoring based on behaviour or personal characteristics.
AI systems that manipulate human behaviour to circumvent free will or exploit vulnerabilities due to age, disability and social or economic situation will also be prohibited.
Insurers and banks must conduct model evaluations, assess and mitigate systemic risks, conduct adversarial testing, report to the European Commission on serious incidents, ensure cyber security and report on their energy efficiency. Failure to comply could lead to fines ranging from EUR7.5m ($8.1m) or 1.5% of turnover to EUR35m or 7% of global turnover, depending on the infringement and the company’s size.
The EU AI act follows a risk-based approach, using tiers to classify the level of risk that AI systems pose to an individual’s health, safety or fundamental rights and it has three tiers. M