Insurance Industry Pushes Back Against Federal Ban on State AI Regulation

Insurance Industry Pushes Back Against Proposed 10-Year Moratorium on State AI Regulation

A recent proposal within the sweeping tax bill known as “One Big Beautiful Bill” seeks to impose a 10-year moratorium on state regulation of artificial intelligence (AI). This move would override existing AI laws and regulations in dozens of states, sparking concern from key players in the insurance sector.

The National Association of Professional Insurance Agents (PIA) has voiced strong opposition. In a letter sent to Senate leadership, PIA urged the Senate to remove the moratorium language or at least exempt the insurance industry. Their argument is clear: insurance is already effectively regulated at the state level, including AI applications.

PIA’s stance is grounded in the existing model established by the National Association of Insurance Commissioners (NAIC). Nearly 30 states have adopted NAIC’s guidelines, which require insurers to manage AI through governance programs aligned with current state and federal laws.

State Regulation Proven Effective

Earlier this month, NAIC reinforced the value of state regulation in a letter to federal lawmakers. They highlighted how state oversight has adapted to market changes while protecting consumers and encouraging innovation.

According to NAIC leadership, allowing states to create and enforce their own AI frameworks ensures regulation remains flexible and relevant. They emphasize that state regulators recognize AI’s transformative potential to enhance insurance products, improve business efficiency, and elevate the consumer experience.

Concerns Over the Bill’s AI Definition

NAIC also criticized the bill’s broad AI definition. Their concern is that it might unintentionally apply to routine tools insurers already use, such as calculations, simulations, and stochastic forecasts, along with many insurtech systems for rate setting, underwriting, and claims processing.

Industry and Legal Voices Against the Moratorium

• The American InsurTech Council (AITC) has expressed strong opposition, warning the moratorium would leave a regulatory vacuum during a critical period of technological change. They argue it threatens core principles of U.S. insurance regulation and weakens consumer protections.
• In May, attorneys general from 40 states urged Congress to remove the moratorium proposal, emphasizing the risks of stalling state-level policy responses.
• The National Council of Insurance Legislators (NCOIL) stated that banning state AI regulation would disrupt insurance markets and restrict legislators’ ability to protect constituents. They note that consumers demand protections against AI-related uncertainties and cannot wait a decade for policy action.

For insurance professionals, this debate highlights the ongoing importance of state-level oversight in managing AI risks and opportunities. Staying informed about these regulatory developments is critical as AI continues to influence insurance pricing, underwriting, claims processing, and customer interactions.

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