Research on the use of Artificial Intelligence and Machine Learning in UK actuarial work
Published: 26 October 2023
The Financial Reporting Council has today published new research examining the use of Artificial Intelligence (AI) and Machine Learning (ML) in UK actuarial work.
The FRC commissioned the Government Actuary’s Department to carry out the research, which was based on interviews with 37 individuals working in the sector and a survey completed by over 100 respondents.
The research found General Insurance Pricing to be the actuarial field currently making greatest use of AI and ML. This includes for determining claims risks, forecasting the price-sensitivity of policyholder groups, and informing customer-facing processes.
In line with expectations that AI and ML have considerable potential to transform the way actuarial work is carried out, the research also found widespread plans among actuaries to increase its use in future, particularly as a result of rapid developments in large language models such as ChatGPT.
The research highlights explainability of AI and ML models as a leading concern among practitioners and their stakeholders, with work practices evolving to address this. The most frequently cited potential risk was AI and ML models being treated as ‘black boxes’ with limited understanding of their internal workings.
Research participants also cited the potential for bias and/or discrimination as important risks that AI and ML might exacerbate in actuarial work. These could arise directly from the techniques used or indirectly from the expanded data usage that AI and ML make possible.
Other key sources of risk for the quality of actuarial work included the quality of data, data privacy, lack of human oversight, and over-reliance on results without understanding their limitations.
Mark Babington, FRC Executive Director of Regulatory Standards, said:
"This research highlights rapid developments in the use of artificial intelligence and machine learning by actuaries and potential risks that need to be mitigated, to both the quality and reliability of actuarial work when AI and ML techniques are used. These will only grow further as AI and ML usage expands. The FRC hopes this research will stimulate further thinking in the industry about how to manage these risks."