Explanation:
The correct answer is B.
In alignment with the AI Risk Management Framework, addressing potential bias requires a deep understanding of how the AI algorithm arrives at its conclusions. By analyzing the system to identify the root cause of the age bias, the company can recalibrate the model to manage harmful bias and ensure fairness without necessarily discarding age as a valid actuarial variable if it reflects genuine risk.
A is incorrect because a flat-rate policy ignores underlying risk differences, defeating the purpose of risk assessment.
C is incorrect because age can be a legitimate, statistically significant factor in insurance pricing; completely removing it might make the model inaccurate. The goal is to ensure it is used fairly and not in a discriminatory manner.
D is incorrect because offering temporary discounts does not solve the root problem in the AI model and leaves the biased system in place.
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Q.5600 You are the lead data analyst at "InsureMax," an insurance company utilizing AI for risk assessment and policy pricing. After implementing the AI system, it becomes apparent that policyholders in certain age groups are consistently receiving higher quotes, leading to accusations of age bias. The pattern suggests that the AI model may be inadvertently discriminating against these age groups, potentially violating fair practice standards and ethical guidelines. What action should InsureMax take to address the potential age bias in its AI system, in line with the principles of fairness and harmful bias management in the AI Risk Management Framework?
A
Implement a flat-rate policy for all age groups to immediately eliminate any appearance of age bias.
B
Analyze the AI system’s algorithm to identify and understand the source of the age bias, and recalibrate the model to ensure fair and equitable policy pricing across all age groups.
C
Remove age as a factor in the AI system’s risk assessment algorithm to prevent any possibility of age-related bias in policy pricing.
D
Offer discounts to the affected age groups as a temporary measure while continuing to use the current AI system without modifications.
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