Panelists included Lisa A. Schilling, FSA, EA, FCA, MAAA, Director of Practice Research, Society of Actuaries Research Institute and Peggy Tsai, Chief Data Officer, BigID. The session underscored the challenges posed by AI, emphasizing the importance of strong governance, transparency, and ongoing process enhancements to maintain fairness in data practices and ensure equitable outcomes in insurance.

Fairness in insurance products and processes has been a long-time hallmark of good management for successful insurance companies. Regulations require companies not be unfairly discriminatory to consumers in their processes and practices. This issue has come to the forefront in the industry recently amid advances in artificial intelligence (AI). Panelists underscored that AI and advanced analytics have heightened both the positive potential and negative implications of existing insurance practices. The discussion emphasized the need for a nuanced approach to fairness that addresses the complexities introduced by these technologies.    

A pivotal theme was the significance of data quality and governance in ensuring fairness. Highlighting the inherent biases that can emerge during data collection, panelists stressed the ongoing recalibration and transparency necessary in model outputs to mitigate these biases effectively. Robust stewardship practices should prioritize data integrity before model building and decision-making. Ensuring accurate risk classification aligned with expected claims values can serve as a fundamental aspect of actuarial fairness.

The panel then examined the challenges posed by data proxies and synthetic data in insurance models. Synthetic data is data that is produced by machines, sometimes to represent human behaviors. Data proxies similarly involve analysis informed by machines processes to represent real-world behavior. Concerns were raised about the accuracy and representativeness of these proxies, particularly in reflecting real-world demographics. The difficulty of removing synthetic data once integrated into models underscored the importance of rigorous validation and transparency throughout the modeling process, including at the beginning of a development process. A critical aspect of the discussion addressed the use of proxies for race and ethnicity in insurance, highlighting the ethical and regulatory implications. Panelists stressed the necessity of rigorous data management and model validation processes to ensure compliance and fairness in risk assessment practices.

The discussion concluded with a consensus on the imperative for continuous monitoring, recalibration, and transparent communication in insurance practices. Balancing data-driven decision-making with fairness and objectivity remains a paramount challenge, requiring ongoing efforts to align technological advancements with ethical standards.

To learn more about AI in financial services, you can explore further with research from the Center for Ethics in Financial Services.

In this episode of our Shares podcast, recorded on the floor of AICPA Engage 2024, host Michael Finke, PhD, CFP® welcomes fellow College professor and former podcast co-host David Blanchett, PhD, MSFS, CFA, CLU®, ChFC®, CFP® to the hot seat for a discussion on one of their favorite topics: comparing what's good and bad about various retirement income planning strategies. For listeners of the former “Wealth, Managed” podcast, it’s like a reunion special! Listen as they explore the differences between fixed and flexible approaches, and the best ways to address risks.

David Blanchett, PhD, MSFS, CFA, CLU®, ChFC®, CFP® is adjunct professor of wealth management at The American College of Financial Services. A world-renowned thought leader in the fields of wealth management and retirement, Blanchett is a leading contributor to the Wealth Management Certified Professional® (WMCP®) Program.

In addition to his role with The College, Blanchett is the managing director and head of retirement research at QMA, a division of Prudential Financial, and was formerly at Morningstar Investment Management, LLC. In his roles, Blanchett enhances consulting and investment services and conducts research primarily in the areas of financial planning, tax planning, annuities, and retirement. Blanchett has published research in a variety of academic and industry journals and has been featured in multiple media publications, such as InvestmentNews, Marketwatch, Money Magazine, The New York Times, PLANSPONSOR Magazine, and The Wall Street Journal.

Any views or opinions expressed in this podcast are the hosts’ and guests' own and do not necessarily represent those of The American College of Financial Services.

ThinkAdvisor | American College Rolls Out CFP® Continuing Education Platform
June 24, 2024

ThinkAdvisor writer John Manganaro details the public launch of The College’s Knowledge Hub+ subscription platform, featuring CFP® CE-approved content available for just-in-time learning.

Morningstar | Retirees That Annuitize Income Spend Twice as Much as Retirees With an Equal Amount of Non-Annuitized Savings
June 25, 2024

College wealth management and retirement planning experts Michael Finke, PhD, CFP® and David Blanchett, PhD, MSFS, CFA, CLU®, ChFC®, CFP® discuss how advisors and clients can work toward lifestyle goals through annuity products and other strategies.

Morningstar | Don Graves and Wade Pfau: How Home Equity Affects Retirement Planning
June 25, 2024

College retirement planning thought leaders Wade Pfau, PhD, CFA, RICP® and Don Graves examine how reserve mortgage strategies can help in retirement planning – and why such products have gotten a bad rap over time.

USA Today | Financial Consultant: Definition and What They Do
June 27, 2024

Industry experts discuss the merits of various financial services designation programs, including The College’s Chartered Financial Consultant® (ChFC®) Program.

Human Capital Innovations | Diversity and Inclusion and Empowering Women in Finance with Lindsey Lewis
June 28, 2024

Lindsey Lewis, MBA, CFP®, ChFC®, executive director of The College’s Center for Women in Financial Services, speaks with Dr. Jonathan H. Westover in a podcast about how to empower women in the financial services field.

Listen as industry thought leaders take part in a thought-provoking discussion on the best strategies to tackle the complexities of long-term care, disability, and caregiving. Gain actionable insights on how to integrate the latest research and policy developments into your practice.

In this episode of our Shares podcast, recorded on the floor of AICPA Engage 2024, Michael Finke, PhD, CFP® engages thought leaders and financial professionals in attendance to discuss the impact of The College’s upcoming Tax Planning Certified Professional® (TPCP®) Program. He talks specifics about the content of the program and dives deeper into the value of specialized tax planning knowledge for advisors in all areas of financial services.

Any views or opinions expressed in this podcast are the hosts’ and guests' own and do not necessarily represent those of The American College of Financial Services.