Pricing Risk: An XAI Analysis of Irish Car Insurance Premiums

With the proliferation of artificial intelligence (AI) in decision-making processes and impending European Union (EU) legislation aiming to safeguard citizens from potential harm, this paper investigates the determinants impacting individual drivers’ car insurance costs. The fundamental principle guiding insurance premiums is the assessment of policyholders’ perceived risk. However, the specific elements informing this assessment remain opaque. To take a deeper look inside the model, our study developed an automated process to collect quote data, considering diverse factors including gender, age (as a proxy for driving experience), geographical location, occupation, and driving history. By conducting an audit of pricing algorithms utilised by insurance companies in the Irish car insurance sector, we gathered quotes from online platforms available in Ireland. Our research provides valuable insights into the multifaceted factors influencing car insurance premiums in Ireland, shedding light on the complexities underlying the algorithmic calculations of insurance quotations. While acknowledging the intricacy of the industry, our analysis reveals evidence of several potentially problematic issues. Notably, we identify that place of residence and occupation exert a direct and substantial impact on the prices quoted to drivers. This study contributes to a deeper understanding of the determinants shaping car insurance premiums, emphasising the need for transparency and fairness within the insurance industry. The findings underscore the significance of addressing systemic disparities and biases in insurance pricing practices to ensure equitable treatment for all drivers.