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NYDFS Proposes AI Guidelines on Insurance Underwriting

"It is critical that insurers who utilize such technologies establish a proper governance and risk management framework to mitigate the potential harm to consumers . . . and develop and manage their use of external consumer data and information sources, artificial intelligence systems, and other predictive models in underwriting and pricing insurance policies and annuity contracts."
NYDFS Proposed Insurance Circular Letter
"It is critical that insurers who utilize such technologies establish a proper governance and risk management framework to mitigate the potential harm to consumers . . . and develop and manage their use of external consumer data and information sources, artificial intelligence systems, and other predictive models in underwriting and pricing insurance policies and annuity contracts."
NYDFS Proposed Insurance Circular Letter

The New York State Department of Financial Services ("NYDFS") proposed guidance on the use of "artificial intelligence systems and external consumer data and information sources in insurance underwriting and pricing."

In its Circular, NYDFS addressed concerns about AI perpetuating or worsening "systemic biases" leading to unlawful or unfair discrimination. The proposed guidance would require insurers to evaluate their use of external consumer data and AI systems for any discriminatory practices, validate their actuarial soundness, and implement robust governance, transparency and risk management controls.

In a press release, NYDFS Superintendent Adrienne A. Harris acknowledged the potential benefits of AI and external data in making insurance processes like underwriting and pricing more efficient and accurate. She highlighted the risks associated with the self-learning nature of AI, and the threat it posed to perpetuating discrimination against vulnerable communities and destabilizing the insurance market. She emphasized that the intent behind the guidance was to balance technological advancement with ethical and legal considerations in the insurance sector.

Primary Sources

  1. NYDFS Press Release: DFS Superintendent Adrienne A. Harris Proposes Artificial Intelligence Guidance to Combat Discrimination
  2. NYDFS Proposed Insurance Circular Letter

Tags

Regulated Activities
Diversity / Discrimination Fintech
Regulated Entities
Other Financial Firms
Sub-Entity
Insurance Companies
Regulated Products
Insurance (as product)
Body of Law
Insurance Law
Jurisdiction
States
Organization
States
Sub-Author
NYDFS