Smart Contracts and AI in Insurance

Abstract

The integration of smart contracts, blockchain, and AI is revolutionizing insurance by boosting efficiency, transparency, and automation, but also introduces legal and regulatory challenges under English common law and the EU AI Act. This chapter explores how smart contracts can be effectively adopted in insurance while addressing trust, transparency, and compliance, focusing on their legal enforceability, use in parametric and marine insurance, and the EU AI Act's stringent demands for fairness, accountability, and transparency in AI-driven processes. It contrasts the UK's flexible, principles-based approach—rooted in good faith and fairness—with the EU's rigid, risk-based framework, assessing their impact on innovation, consumer protection, and cross-border operations. By analyzing algorithmic bias, explainability, liability, and fraud detection, the study provides a holistic legal and regulatory analysis and proposes a balanced framework to harmonize innovation with legal compliance, ensuring a fair, transparent, and resilient insurance market in the digital age.