In recent weeks a number of states have adopted the Model Bulletin: Use of Artificial Intelligence Systems by Insurers (the “Model Bulletin”) adopted last December by the National Association of Insurance Commissioners (“NAIC”). Alaska[1] was the first state to adopt the Model Bulletin back in February, followed by Connecticut[2] and New Hampshire,[3] with Illinois,[4] Vermont,[5] and Rhode Island[6] opting to adopt the Model Bulletin earlier this month. The word on the grapevine is that Maryland and Pennsylvania will be next.

Connecticut is an outlier among those states that have adopted the Model Bulletin such that Connecticut requires insurers domiciled there to certify to their compliance. The Artificial Intelligence Certification is due on September 1, 2024, and annually thereafter.

Not all states are choosing to adopt the Model Bulletin. California, Colorado, and New York have each taken a different approach.

  • California: In June 2022, the California Department of Insurance issued Bulletin 2022-5[7] which broadly addresses allegations of racial bias and unfair discrimination in marketing, rating, and claims practices by the insurance industry. This broadly worded bulletin applies not only to insurance companies but also licensed insurance intermediaries. Furthermore, in its application to “Big Data,” models and algorithms, it implicates artificial intelligence and machine learning.
  • Colorado: Following the enactment of SB21-169[8] which prohibits unfair discrimination via the use of external consumer data, the Colorado Department of Regulatory Agencies (“DORA”) has been developing business line specific regulations, specifically Regulation 10-1-1[9] pertaining to life insurers’ use of algorithms and predictive models, while separate regulations covering private passenger auto and health insurance are in the works.
  • New York: In January 2024, the New York Department of Financial Services (“DFS”) issued for public comment a proposed circular letter pertaining to the use of artificial intelligence systems and external consumer data and information sources in insurance underwriting and pricing. The DFS proposal would be applicable to all insurers authorized to write insurance in New York and incorporates aspects of both the Model Bulletin and Colorado’s Regulation 10-1-1. The public comment period closed on March 17, 2024.

While it is likely in the short term that additional states will adopt the Model Bulletin, as evidenced by California, Colorado, and New York, some states may choose an alternate route.

Locke Lord will continue to monitor developments pertaining to the regulation of artificial intelligence, algorithms, big data, machine learning, and predictive modeling in the insurance industry. If you have any questions, please reach out to the author or your Locke Lord partner.

 

[1] Alaska Department of Commerce, Community, and Economic Development, Division of Insurance, Bulletin B 24-01, Re: The Use of Artificial Intelligence Systems in Insurance (February 1, 2024).

[2] Connecticut Insurance Department, Bulletin No. MC-25, Re: The Use of Artificial Intelligence Systems in Insurance (February 26, 2024).

[3] State of New Hampshire Insurance Department, Bulletin #INS 24-011-AB, Re: Use of Artificial Intelligence Systems by Insurers (February 20, 2024).

[4] Illinois Department of Insurance, Company Bulletin 2024-08 The Use of Artificial Intelligence Systems in Insurance (March 13, 2024).

[5] Vermont Department of Financial Regulation, Insurance Division, Insurance Bulletin No. 229, The Use of Artificial Intelligence Systems in Insurance (March 12, 2024).

[6] Rhode Island Department of Business Regulation, Insurance Division, Insurance Bulletin Number 2024-03, Use of Artificial Intelligence Systems by Insurers (March 15, 2024).

[7] California Department of Insurance, Bulletin 2022-5, Re: Allegations of Racial Bias and Unfair Discrimination in Marketing, Rating, Underwriting, and Claims Practices by the Insurance Industry (June 30, 2022).

[8] Colo. Rev. Stat. § 10-3-1104.9

[9] 3 Colo. Code Regs. § 702-10.

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