The National Association of Insurance Commissioners (NAIC) membership has voted to adopt the Model Bulletin on the Use of Artificial Intelligence (AI) Systems by Insurers during the 2023 Fall National Meeting.
“This initiative represents a collaborative effort to set clear expectations for state Departments of Insurance regarding the utilization of AI by insurance companies, balancing the potential for innovation with the imperative to address unique risks,” said Commissioner Kathleen A. Birrane.
“As the insurance sector navigates the complexities of AI, the NAIC’s Model Bulletin on the Use of Artificial Intelligence Systems by Insurers provides a robust foundation to safeguard consumers, promote fairness, and uphold the highest standards of integrity within the industry.”
The bulletin also reflects the work of the NAIC Innovation, Cybersecurity, and Technology (H) Committee, chaired by Maryland Insurance Commissioner Kathleen A. Birrane.
Both Michael Conway, Commissioner of the Colorado Division of Insurance, and Doug Ommen, Commissioner of the Iowa Insurance Division, are co-vice chairs of the committee.
Moreover, the H Committee, which is comprised of representatives from across 15 states, began drafting the bulletin in earlier this year with the goal of establishing comprehensive regulatory standards to ensure the responsible deployment of AI across the insurance sector.
A highly important factor to note, is that the bulletin addresses critical issues related to the usage of AI. This includes potential inaccuracies, unfair biases leading to discrimination, as well as data vulnerabilities.
At the same time, the NAIC notes that the AI model bulletin serves as a guiding document, promoting uniformity among state insurance regulators regarding expectations for insurance carriers deploying AI technology.
The bulletin comprises four key sections, that each address critical aspects of AI usage by insurers. It emphasizes the importance of responsible governance, risk management policies, and procedures to ensure fair and accurate outcomes for consumers.
NAIC also explained that the bulletin reminds insurance carriers that decisions impacting consumers that are made or supported by advanced analytical and computational technologies – which includes AI – must comply with all applicable insurance laws and regulations.
It has also been confirmed, that the bulletin sets forth state insurance regulators’ expectations on how insurers should govern the use of such technologies by or on behalf of the insurer to make or support such decisions. This includes: the creation and implementation of a written AIS Program, commensurate with an assessment of the risk in accordance with the guidelines established by the NAIC’s 2020 Principles of AI, and to ensure that decisions impacting consumers made or supported by AI are accurate and do not violate unfair trade practice laws or other applicable legal standards.
The initial draft was presented to the working group on June 29, 2023, and subsequently exposed for public comment periods, which allowed for input from industry stakeholders, consumers, and legislators.
The process involved two exposure periods, with the first public comment period ending on September 5, 2023, and the second ending on November 6, 2023.
The completion and adoption of the model bulletin clearly marks a significant step forward in adapting regulatory frameworks to the evolving landscape of AI across the insurance industry.
