States Begin to Implement NAIC’s AI Guidelines for Insurers, Marking a New Regulatory Era

The insurance industry is navigating a significant shift as seven states have embraced the National Association of Insurance Commissioners’ (NAIC) guidelines on the use of artificial intelligence (AI). This initiative represents an early step towards regulating the rapidly advancing AI technology within the sector. States like Alaska, Connecticut, New Hampshire, Illinois, Vermont, Nevada, and Rhode Island are leading the charge, with expectations that others will join in the near future.

The NAIC Model Bulletin mandates insurers to establish a detailed program for AI’s responsible usage, covering governance, risk management, internal controls, and the procurement of third-party AI systems and data. This move, while aimed at promoting ethical AI use, is anticipated to be a hefty undertaking for insurance companies, demanding significant time and resources to ensure compliance.

Despite these steps forward, consumer advocates argue for stricter regulations to prevent AI from unintentionally perpetuating discrimination, especially given past findings of bias in insurance pricing. Meanwhile, states such as California, Colorado, and New York are pursuing their own paths in AI regulation, highlighting the diverse approaches to addressing AI’s implications in insurance practices.

The industry’s push for a unified regulatory framework is underscored by the challenges of navigating a "patchwork" of state-based regulations, which could lead to inconsistencies across the board. The adoption of NAIC’s guidelines by a majority of states could pave the way for a more standardized approach to AI governance in insurance, aligning with insurers’ calls for consistency while safeguarding consumer interests.