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Insurance Commissioners Warn Senate: Proposed AI Regulation Freeze Threatens Fairness and Consumer Protections
State insurance commissioners warn a proposed bill’s broad AI definition could freeze essential oversight for 10 years, risking fairness and consumer protections. They urge amendments to avoid regulatory gaps and legal uncertainty.
Insurance Commissioners Urge Senate to Reconsider Proposed State AI Rules
State insurance commissioners have raised serious concerns about a provision in the proposed reconciliation legislation, the "One Big Beautiful Bill Act," which would impose a 10-year freeze on new state-level artificial intelligence regulations and suspend enforcement of existing ones. In a letter from the National Association of Insurance Commissioners (NAIC), regulators warn that the bill’s definition of AI is overly broad and could unintentionally include many common tools and analytics used daily in the insurance industry.
This expansive definition risks limiting regulators’ ability to oversee technologies that don’t fit neatly into the AI category but still impact fairness and consumer protection. The commissioners stress that the moratorium could disrupt established oversight practices designed to ensure transparency and nondiscrimination in pricing and underwriting.
Concerns Over Oversight and Fairness
The letter points out that the bill’s language may capture basic data tools and software widely used by insurers, going beyond just machine learning systems. If this provision becomes law, it could hinder regulators from addressing new challenges linked to emerging technologies.
Many state insurance departments already have protocols to evaluate predictive models and uphold fairness standards. A freeze on AI regulations threatens to weaken these protections, especially as the use of predictive analytics grows.
AI as a Strategic Priority for Insurance
Earlier this year, the NAIC designated AI as a strategic priority, recognizing its increasing role across underwriting, pricing, and claims. While AI can improve efficiency, it also raises important questions about accountability, transparency, and bias that require ongoing regulatory attention.
The commissioners also warn that the moratorium could create legal uncertainty for insurers, delay consumer protection efforts, and complicate business decisions due to unclear compliance and enforcement rules.
Industry Responses and Regulatory Frameworks
Separately, the American InsurTech Council has proposed a framework requiring insurers to file annual attestations confirming that their AI systems comply with state insurance laws. This framework includes oversight of third-party models and data, promoting accountability for AI technologies throughout insurance operations.
Consumer advocates have flagged risks with AI in health insurance, particularly in utilization management where automated tools decide on medical service approvals. These systems could deny or delay care in ways that are difficult to appeal or understand, highlighting the need for strong oversight.
Federal vs. State Regulatory Tensions
The NAIC has previously criticized federal efforts, such as those by the Federal Insurance Office (FIO), to collect market data, arguing such efforts duplicate state functions and risk weakening the state-based insurance regulatory system that has existed for decades.
Over half of US states have already adopted NAIC model bulletins or guidelines on AI. Ongoing work to develop AI-related model laws with industry input shows active state engagement on these issues.
Calls for Amendments and Legal Considerations
In their letter, NAIC leaders urged lawmakers to remove or amend the AI provision in the bill. They also suggested exempting the insurance sector if the provision moves forward.
The commissioners noted that the provision could face legal challenges under the McCarran-Ferguson Act, which protects state insurance regulations from being overridden by federal law. However, until a ruling is issued, insurers would face uncertain regulatory expectations and potential litigation risks.
For insurance professionals looking to understand how AI is shaping the industry and regulatory responses, staying informed on state-level developments is essential. Resources such as Complete AI Training offer courses that can help deepen knowledge of AI applications and compliance concerns in insurance.