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Regulating Robo-Advisors in Insurance Distribution: Lessons from the Insurance Distribution Directive and the AI Act

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  • Pierpaolo Marano

    (Department of Insurance and Risk Management, University of Malta, MSD 2080 Msida, Malta
    Department of Finance and Accounting, Latvijas Universitāte, LV-1586 Rīga, Latvia
    Department of Legal Studies, Catholic University of the Sacred Heart, 20122 Milan, Italy)

  • Shu Li

    (Legal Tech Lab, University of Helsinki, Yliopistonkatu 4, 00100 Helsinki, Finland)

Abstract

Insurance distributors are increasingly using robo-advisors for a variety of tasks, ranging from facilitating communication with customers to providing substantive advice. Like many other AI-empowered applications, robo-advisors have the potential to pose substantial risks that should be regulated and corrected by legal instruments. In this article, we attempt to discuss the regulation of robo-advisors from the perspective of the Insurance Distribution Directive and the draft AI Act. We ask two questions for each. (1) From a positive legal perspective, what obligations are imposed on insurance distributors by the legislation when they deploy robo-advisors in their business? (2) From a normative perspective, are the incumbent provisions within that legislation effective at ensuring the ethical and responsible use of robo-advisors? Our results show that neither the Insurance Distribution Directive nor the AI Act adequately address the emerging risks associated with robo-advisors. The rules implicated by them regarding the use of robo-advisors for insurance distribution are inconsistent, disproportionate, and implicit. Legislators shall further address these issues, and authorities such as EIOPA and national competent authorities must also participate by providing concrete guidelines.

Suggested Citation

  • Pierpaolo Marano & Shu Li, 2023. "Regulating Robo-Advisors in Insurance Distribution: Lessons from the Insurance Distribution Directive and the AI Act," Risks, MDPI, vol. 11(1), pages 1-13, January.
    • Handle: RePEc:gam:jrisks:v:11:y:2023:i:1:p:12-:d:1025293
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    References listed on IDEAS

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    1. Pierpaolo Marano, 2021. "Management of Distribution Risks and Digital Transformation of Insurance Distribution—A Regulatory Gap in the IDD," Risks, MDPI, vol. 9(8), pages 1-11, August.
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    Cited by:

    1. Iwanicz-Drozdowska Małgorzata & Cichowicz Ewa & Cicirko Marianna & Kawiński Marcin & Nowak Agnieszka K., 2023. "New technologies in the financial industry: Case of Poland," Economics and Business Review, Sciendo, vol. 9(3), pages 98-123, October.
    2. Ramona Rupeika-Apoga & Pierpaolo Marano, 2023. "The Risk Landscape in the Digital Transformation of Finance and Insurance," Risks, MDPI, vol. 11(7), pages 1-2, July.
    3. Jorge Andrés-Sánchez & Jaume Gené-Albesa, 2024. "Not with the bot! The relevance of trust to explain the acceptance of chatbots by insurance customers," Palgrave Communications, Palgrave Macmillan, vol. 11(1), pages 1-12, December.

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