On June 12, 2026, the Texas Department of Insurance issued a bulletin confirming that every consumer-facing decision made or supported by AI must comply with existing insurance laws - no exceptions for algorithms. The directive puts carriers, MGAs, adjusters, and third-party vendors on notice that regulators will examine AI governance frameworks during routine market conduct reviews and expect documented human oversight on consequential decisions.
What the bulletin covers
TDI issued Commissioner's Bulletin No. B-0003-26 to set expectations for how regulated entities should govern the development, acquisition, and use of AI across their operations. The scope extends to agents, representatives, and any third party working with a regulated entity. TDI points to the NAIC's 2020 Principles on Artificial Intelligence and the Texas Department of Information Resources' AI Code of Ethics and Minimum Standards as useful frameworks, noting that the latter promotes human oversight, fairness, accuracy, redress, transparency, data privacy, security, and accountability.
The bulletin does not create new legal obligations. Instead, it catalogs the existing statutory provisions that apply regardless of the technology used. These include Texas Insurance Code Chapters 541 (Unfair Methods of Competition and Unfair or Deceptive Acts or Practices), 542 (Processing and Settlement of Claims), 544 (Prohibited Discrimination), 560 (Prohibited Rates), 831 (Corporate Governance Annual Disclosure), 4001 (Agent Licensing), 4101 (Insurance Adjusters), and 4201 (Utilization Review Agents). Chapter 4201 expressly bars using AI to make an adverse determination.
Core expectations for AI use
TDI's guidance emphasizes several operational requirements. AI-driven decisions must not be inaccurate, arbitrary, capricious, or unfairly discriminatory. Regulated entities should implement controls and guardrails to mitigate the risk of adverse consumer outcomes. For consequential decisions made using AI, a human must review and agree with the decision before any action is taken - not merely rubber-stamp an output the system already produced.
Strong governance, risk management, and internal audit functions are viewed as central to compliance. TDI expects verification and testing methods designed to catch errors and bias. The department will monitor AI use through examinations and product filings, will investigate consumer complaints about AI, and expects entities to produce their AI governance procedures and protections upon request.
Vendor tools remain the insurer's responsibility
The bulletin makes clear that accountability does not shift when a third-party AI platform does the heavy lifting. If a vendor tool produces an outcome that discriminates unfairly or cannot be explained, the regulated entity using it remains on the hook. This has direct implications for underwriting engines, claims triage platforms, and pricing models sourced from external providers.
Practically, this means maintaining a governance file documenting what the AI tool does, how it was tested for bias and accuracy, who reviews its outputs, and how errors are corrected. Entities that already maintain model governance programs for credit or fraud models have a head start, but should extend those programs specifically to insurance decisions such as underwriting and claims handling. For professionals building or overseeing these programs, targeted training like AI for Insurance Courses can help teams align internal controls with regulatory expectations.
Why this matters for insurance professionals
TDI's bulletin signals that an insurer cannot point to an algorithm as the reason a decision was fair, accurate, or lawful. Existing legal standards still apply in full, and companies must now be prepared to demonstrate how those standards were met. For underwriters, claims managers, compliance officers, and product teams already using AI in consumer-facing functions, the immediate task is to verify that a qualified human is genuinely reviewing and signing off on significant decisions. The governance file is no longer optional - it is the first thing an examiner will ask to see.
Regulatory affairs teams will need to integrate AI oversight into existing compliance workflows. Resources such as the AI for Regulatory Affairs Specialists learning path offer structured guidance for professionals navigating these requirements. The bulletin does not prescribe specific documentation formats, but it puts the industry on notice that examiners will probe governance frameworks, risk management processes, data privacy protections, and internal controls - including questions about specific AI applications. Preparation should start now, not when the examination letter arrives.
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