The use of AI to create “hyper-personalised” insurance plans risks leaving consumers “uninsurable” and could increase “discrimination”, warned the chief UK financial watchdog.
Speaking at the StepChange Connected conference in Leeds, Financial Conduct Authority (FCA) chief executive Nikhil Rathi discussed the incorporation of AI technologies in financial services.
“We want safe and responsible use of AI to drive beneficial innovation,” Rathi said.
Rathi cited the example of an Edinburgh-based fintech that had seen benefits from using anonymous chatbots to provide debt advice to reduce the “associated stigma”.
However, he warned, there still needs to be an “open conversation about the risks and trade-offs”.
The FCA boss said while insurance firms could use the technology to provide tailored premiums based on “AI-enabled hyper-personalisation of insurance”, many consumers could be worse off from it.
Rathi acknowledge that he does not yet know the extent of the benefits of the technology, “but experience elsewhere suggests that resolving foundational issues could have big impacts”.
“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?” He asked.
Rathi pointed to the “recent controversy surrounding dynamic pricing for Oasis” tickets as an example wherein just because something “can be done, doesn’t mean the public will accept it”.