Explanation matters: An experimental study on explainable AI

Explainable artificial intelligence (XAI) is an important advance in the field of machine learning to shed light on black box algorithms and thus a promising approach to improving artificial intelligence (AI) adoption. While previous literature has already addressed the technological benefits of XAI, there has been little research on XAI from the user’s perspective. Building upon the theory of trust, we propose a model that hypothesizes that post hoc explainability (using Shapley Additive Explanations) has a significant impact on use-related variables in this context. To test our model, we designed an experiment using a randomized controlled trial design where participants compare signatures and detect forged signatures. Surprisingly, our study shows that XAI only has a small but significant impact on perceived explainability. Nevertheless, we demonstrate that a high level of perceived explainability has a strong impact on important constructs including trust and perceived use- fulness. A post hoc analysis shows that hedonic factors are significantly related to perceived explainability and require more attention in future research. We conclude with important directions for academia and for organizations.

to R+V

to EBS University

White paper: Insurance sales in the metaverse and virtual worlds

The white paper was prepared by the 10th cohort of the LL.M programme at the Institute of Insurance Law at TH Köln in the module Insurance Distribution Law. The white paper deals with the legal aspects of digital insurance distribution in the metaverse and virtual worlds. Due to the rapid technical development and the economic interest in becoming active as insurers, brokers, intermediaries or in similar roles in the metaverse, the question arises as to whether insurance contracts can be marketed and concluded in a legally effective manner. As the metaverse operates across national borders, this white paper not only models the sales opportunities but also examines the question of whether German law is already equipped for the digital world of the metaverse. Even with today's legal tools, insurance contract law (including VVG, VAG), data protection law (GDPR) and labour protection law, contracts can also be concluded in the virtual world. However, it is questionable what the actual implementation will look like.

to ivwKöln

The Interplay of Quality and Information in Insurance Markets

How does insurance competition change with digital innovation? How can an Insurtech be profitable in a competitive environment? And how can incumbent insurance companies respond to this threat? In this single-authored paper, I develop a rigorous economic model that answers these questions. Two dimensions are crucial in this model, differentiating it from previous work. The first trend is in underwriting. Historically, data such as age and occupation categorized consumers' risk levels, with most firms having access to similar data. Now, with the rise of big data, there is a move towards integrated solutions and business partnerships, tapping into unique data like sensor readings and online activity. This leads to information asymmetries between insurance companies where one can quickly fall behind. The second key trend is competition based on service quality. Notably, 59% of insurance executives believe that service quality, particularly customer experience, is the primary driver for competitive success (Deloitte, 2018). In my paper, I incorporate these trends into a model and find the optimal strategies and resulting profits in such a setting. Therefore, the paper deepens our understanding of how insurance markets behave with digital disruption. The paper also offers valuable guidance for decision makers at Insurtechs as well as incumbents who need to navigate a fast-paced changing digital environment.

to Universiy of St. Gallen