The European Commission recently launched a targeted consultation along with a workshop series to seek input on the use of Artificial Intelligence (AI) in the financial sector. The consultation aims to identify key use cases, benefits, barriers, and risks associated with AI applications in financial services.
The views obtained will support the Commission in their assessment of market developments and risks related to AI and in the implementation of the AI Act, which was published on the 12 July and will enter into force on the 1 August.
For the purpose of this targeted consultation, the concept of AI corresponds to the definition of an AI system established in the AI Act, which covers “any machine-based system designed to operate with varying levels of autonomy and that may exhibit adaptiveness after deployment and that, for explicit or implicit objectives, infers, from the input it receives, how to generate outputs such as predictions, content, recommendations, or decisions that can influence physical or virtual environments”
Target audience
The targeted consultation will gather input from all financial services stakeholders including companies and consumer associations. Views are particularly welcome from financial firms that provide or deploy/use AI systems. The consultation is designed for respondents developing or planning to develop or use AI applications in financial services.
Responding to the Consultation
Stakeholders are invited to respond to the online questionnaire by 13 September. The questionnaire contains a mix of multiple choice and open questions and is structured into three parts.
- Part one covers general question on the development of AI.
- Part two covers specific use cases in finance.
- Part three covers the AI act as it relates to the financial sector.
Registration for a series of workshops co-hosted with the European Supervisory Authorities and national supervisors, which will take place in autumn, is open until 26 July. The workshops will give stakeholders the opportunity to present projects and exchange ideas about the latest developments.
Insurance and pensions specific questions
Part two of the questionnaire sets out questions specific to different parts of the financial sector which includes the insurance and pensions sector.
The questionnaire identifies possible AI use cases including:
- Insurance pricing and underwriting to advice;
- Compliance;
- Fraud detection/anti-money laundering (AML); and
- Customer service.
The questionnaire also identifies relevant legislation that might apply depending on the use case, which includes,
- EU AI Act - for example for the identified high risk use-cases such as life and health insurance risk assessment and pricing in relation to natural persons;
- Insurance Distribution Directive (IDD) - for example for robo-advice
- Solvency II and institutions for occupational retirement provisions (IORPs) - for example for provisions on risk management in relation to insurance risk assessment;
- Anti-Money Laundering Directive (AMLD) - for example for AML use cases.
The questionnaire includes 8 questions in relation to the use cases in insurance and pensions sectors. The questions are largely open and seek to gather insights on following areas:
- Use cases that currently use AI/are considering using AI
- The opportunities that AI brings to use case
- The risks and challenges that can be presented, for example discrimination
- The main barriers to developing a use case; for example lack of skills and resources
- Bias including
- If AI increases or reduces bias and discrimination
- How insurers can ensure outcomes of AI are not biased
- If AI has opened new possibilities or risks in the use case
- Reliance on development of AI solutions, external providers, in-house applications, or partial collaboration with external providers
Part 3 of the questionnaire covers the AI Act as it relates to the financial sector. The aim of this section is to identify stakeholder-specific needs in order for the Commission to be able to adequately assist with appropriate guidance for the implementation of the upcoming AI framework, especially in relation to the high-risk use cases identified.
The questionnaire highlights the two high-risk use cases that the AI Act has established for the financial sector which includes: “AI systems intended to be used for risk assessment and pricing in relation to natural persons in the case of life and health insurance”. Given the focus of part 3 on the high-risk use cases identified, this section is of particular importance for insurance sector.
How KPMG can help
Through our combined Insurance, Technology, Risk and Regulatory expertise, we can support the development of AI use cases and the understanding of the risks that can arise from these uses.
Furthermore, based on our understanding of existing legislation and the sources of good practice we have observed, we can assist in identifying and developing actions firms can take to mitigate the risks that can arise.
Get in touch
Discover how to develop AI use cases in your organisation and understand the risks that could arise by talking to our in-house experts today.
