Colorado Leads U.S. in AI Insurance Regulations, EU Follows Suit
The insurance industry is witnessing significant regulatory changes concerning artificial intelligence. Colorado has emerged as one of the first U.S. states to implement legally binding regulations for algorithmic fairness and AI governance in insurance, effective November 14, 2023. Meanwhile, the National Association of Insurance Commissioners (NAIC) has adopted a model bulletin on AI use, with 24 states adopting it thus far.
Colorado's regulations mandate life insurers using external consumer data to establish a governance framework. This is a significant step towards ensuring fairness and transparency in AI-driven insurance practices. However, consumer advocates have expressed disappointment that the NAIC model bulletin did not include elements of discrimination outlined in the initial AI principles.
The National Conference of Insurance Legislators (NCOIL) has also been active in this area. In December 2023, it adopted the NCOIL Model Act Regarding Insurers' Use of Artificial Intelligence, which requires human review of AI-generated outputs for claim decisions. This act also mandates insurers to maintain detailed records of human professionals' actions in the decision-making process. NCOIL plans to resume discussions on the AI model during its annual meeting in November.
On an international scale, the European Union (EU) has developed the EU AI Act, a comprehensive regulatory framework for artificial intelligence that also applies to the use of AI by insurance companies. This law came into force in August 2024 and was drafted by the EU Parliament, Council, and Commission.
Regulators are divided on whether to proceed with a model law governing AI use in insurance companies. While Colorado's regulations and the NAIC model bulletin are steps forward, there is still much debate and work to be done to ensure fair and responsible AI use in the insurance industry.
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