Artificial Intelligence in Insurance

The promise of AI must be tempered by the responsibility for its use by insurance companies according to a guidance bulletin published December 4 by the National Association of Insurance Commissioners (NAIC).

According NAIC Commissioner Birrane, “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,” and “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 covers a number of areas but the author takes particular note of this admonition “decisions impacting consumers that are made or supported by advanced analytical and computational technologies, including AI, must comply with all applicable insurance laws and regulations, including unfair trade practices. The bulletin also 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, including 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 Artificial Intelligence, 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 bulletin also advises insurers of documentation that a state Department of Insurance may request during an investigation or examination.”

Here's the bottom line for an insurance company’s use of AI—you can delegate the task, but not the responsibility.