Governing artificial intelligence in insurance: legal challenges and regulatory reform

Abstract

The rapid integration of artificial intelligence (AI) into the insurance sector raises significant legal concerns regarding the allocation of liability, algorithmic transparency, and consumer protection. This study employs a doctrinal and comparative legal methodology to examine the regulation of AI-based insurance systems in the United Arab Emirates and Saudi Arabia, using international standards as a reference, particularly Article 22 of the General Data Protection Regulation and certain regulatory approaches in the United States. The analysis identifies a central doctrinal problem: the fragmentation of liability among insurers, software developers, and automated decision-making systems. The findings reveal that the current legal frameworks in both jurisdictions lack clear rules on the allocation of liability, offer limited guarantees of algorithmic transparency, and do not ensure effective redress mechanisms for consumers. These deficiencies contribute to regulatory inconsistency and increase the risk of discriminatory outcomes in underwriting and claims management. The study contributes to the legal literature by developing a doctrinal framework that conceptualizes the fragmentation of liability in AI-assisted insurance and proposes a reform model based on the principles of fairness, accountability, transparency, and explainability (FATE) as enforceable legal standards