AI can improve insurance segmentation and underwriting efficiency, but an insurer must be able to justify the variables, monitor outcomes and explain the customer impact. Compliance by design means building those controls before a model is used to quote, refer, decline or adjust cover.
Connect features to risk rationale
Actuarial teams should document why a feature is relevant to expected loss, expense, fraud or service risk. Statistical association alone is not enough where a feature may be a proxy for a protected characteristic or may create an unjustified barrier to cover.
Monitor price and access outcomes
Track achieved price, referral, decline, claim, complaint and lapse outcomes by meaningful groups and segments. Compare model predictions with actual experience and investigate unexplained changes. Monitoring should cover both accuracy and customer impact.
Govern overrides and updates
Underwriter overrides should be recorded and analysed. Model updates, new data, vendor changes and revised policy wording should trigger reassessment. The European Commission AI framework provides a useful risk-based foundation; local insurance and equality rules still apply.