The Australian Securities and Investments Commission is reviewing the use of artificial intelligence (AI) in the insurance, advice, banking and credit sectors amid concerns rapid uptake of the technology is increasing risks for consumers and outpacing regulation.

The review will give the regulator a better understanding of the ways in which AI is being deployed and developed in the Australian market, and the impact on consumers, Chair Joe Longo told a University of Technology Sydney symposium yesterday.

“We’re testing what risks to consumers licensees are identifying from the use of AI, and how they’re mitigating against these risks,” he said.

Mr Longo says current financial sector rules, such as obligations to act efficiently and fairly, apply to AI, and use of the technology is “not the wild west”, but current regulation may not be enough.

“Even as AI ‘leaps forward’ at a rate never seen before, questions around transparency and explainability become paramount if we’re to protect consumers from harm – intended or not,” he said.

Vulnerable customers could be unfairly discriminated against as AI analyses data, he warns.

“What happens when they’re denied a mortgage because an algorithm decides they should be? When that person ends up paying a higher insurance premium, will they know why, or even that they’re paying a higher premium? Will the provider?”

Questions also arise over whether someone could appeal and how the company would respond, with experts often unable to explain how a particular system works.

“The point is, there’s a need for transparency and oversight to prevent unfair practices – accidental or intended,” Mr Longo said.

“But can our current regulatory framework ensure that happens? I’m not so sure.”

The regulator has used existing regulations against companies for technology failings, including on general insurer pricing discount promises.

Mr Longo told the symposium the regulator is “already pursuing an action in which AI-related issues arise, where we believe the use of a demand model was part of an insurance pricing process that led to the full benefit of advertised loyalty discounts not being appropriately applied”.

The Federal Government recently conducted a consultation on safe and responsible AI, and guardrails that may be required.

Its report says it is estimated that AI and automation could add $170 billion to $600 billion a year to Australia’s gross domestic product by 2030.

The Australian Signals Directorate has outlined challenges around AI use including data poisoning, input manipulation, AI “hallucinations” and privacy and intellectual property concerns.