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USA: NAIC releases draft model bulletin on AI for insurance sector

The National Association of Insurance Commissioners (NAIC) released, on July 17, 2023, a model bulletin containing an exposure draft on the use of algorithms, predictive models, and artificial intelligence (AI) systems by insurers. In particular, the model bulletin aims to remind all certified insurers that decisions impacting consumers that are made or supported by advanced analytical and computational technologies, including AI systems, must comply with all applicable insurance laws and regulations, including on unfair trade practices.

More in detail, the model bulletin sets out the expectations as to how insurers will govern the development/acquisition and use of the abovementioned technologies and systems, also advising the information and documentation that the relevant authority may request from insurers during an investigation or examination of their use of such technologies or systems.

Among other things, the model bulletin outlines that all insurers are encouraged to develop, implement, and maintain a written program (AIS Program) for the use of AI systems that is designed to assure that decisions impacting consumers made or supported by AI systems are accurate and do not violate unfair trade practice laws or other applicable legal standards. In this context, the model bulletin highlights that an AIS Program should be reflective of, and commensurate with, the insurer's assessment of the risk posed by its use of an AI system, considering factors, such as the nature of the decisions being made, informed, or supported using the AI system, and the extent to which humans are 'in-the-loop.'

You can download the model bulletin here.