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NAIC Model Bulletin on AI: What Insurers Need to Know About Compliance and Oversight
The NAIC’s 2023 model bulletin guides insurers on responsible AI use, emphasizing transparency, fairness, and accountability. Twenty-four states have adopted it, promoting risk management and regulatory compliance.
The Implications and Scope of the NAIC Model Bulletin on the Use of AI by Insurers
The National Association of Insurance Commissioners (NAIC) released a model bulletin at the end of 2023 to guide insurers on the responsible use of artificial intelligence (AI). This bulletin emphasizes transparency, fairness, and accountability in AI applications within the insurance sector. Since its introduction, 24 states have adopted the model bulletin, with several others issuing related regulations or guidance.
Guidance Provided by the Model Bulletin
The bulletin requires insurers to establish and maintain a documented AI program, referred to as an AIS Program, to promote responsible AI use and minimize risks such as inaccurate or discriminatory decisions. This is especially important when AI is used in regulated processes.
Key elements of the AIS Program include:
- Clear governance frameworks that ensure transparency and accountability.
- Regular auditing processes to monitor AI systems.
- Strong risk management practices and internal controls.
- Oversight of third-party vendors involved in AI development or deployment.
The AIS Program should prevent violations of insurance laws, including those addressing unfair trade practices and discrimination. Insurers are encouraged to implement verification and testing methods to detect errors, biases, or unfair discrimination in AI models and systems.
Additionally, the model bulletin outlines expectations for regulatory oversight. Insurers should prepare for audits and investigations focusing on their AI governance, risk management, and internal controls. Maintaining thorough documentation of AI policies, protocols, and procedures is essential.
Governance and Enforcement Status
Since the bulletin’s release, 24 states have formally adopted it, and four others have introduced related regulations or guidance. The NAIC tracks state adoption and provides resources detailing implementation status and citations.
Currently, enforcement activity appears limited in states that have adopted the bulletin. However, insurers should remain vigilant and ready to respond to regulatory inquiries regarding their AI programs.
Staying informed about regulatory developments and maintaining comprehensive documentation will help insurers manage compliance risks effectively.
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