In “Regulatory Scrutiny Over How Insurers Use AI is Ramping Up Fast,” Life Annuity Specialist spoke with insurance partner Scott Kosnoff about artificial intelligence (AI) regulation following his presentation at the 2023 Life Insurance & Annuity Conference.
Kosnoff shared that he’s a fan of AI, but cautioned that there are also downsides. “If your organization is using AI, like it or not, you’re exposed to regulatory litigation and reputational risk,” he said.
Kosnoff noted that a model bulletin by the National Association of Insurance Commissioners (NAIC) is expected to be released in early summer as a way to monitor the use of AI. In 2020, the NAIC adopted nonbinding principles for issuers to take proactive steps to avoid discrimination against protected classes. “They were adopted with a lot of hullabaloo, but they were nonbinding, so there was a lot of shrugging,” he said.
Kosnoff commented on Colorado Senate bill 21-169, which prohibits insurers from using consumer data along with algorithms and predictive models that discriminate against people based on race, religion, sex, gender identity or disability, saying it will have a “significant impact” on the industry once implemented. He noted that the Colorado legislation goes further than the NAIC principles, requiring a risk management framework, algorithmic testing and submission of reports.
In his presentation, Kosnoff highlighted efforts in various states and said that New York regulators are using consultants to study the use of AI and machine learning in life insurance. “You’re getting the impression here that just about every tentacle of the federal government is touching this in some way,” he said.
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