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April 11, 2024

Scott Kosnoff Discusses the NAIC’s Model Bulletin on the Use of Artificial Intelligence Systems With InsuranceNewsNet

In the article, “7 states adopt AI rules; insurer compliance called ‘significant lift’,” InsuranceNewsNet turned to insurance partner and co-leader of the firm’s AI-X team Scott Kosnoff for insight on the developments surrounding the National Association of Insurance Commissioners (NAIC)’s model bulletin, which provides guidelines for the use of artificial intelligence that insurers “are expected” to follow, the publication reported.

“Complying with the NAIC bulletin will entail a significant lift for most insurers,” said Kosnoff. “It’s not the sort of thing you can knock out over a three-day weekend.”

The article also reports that consumer advocates are particularly concerned that AI modeling could generate unintentional discrimination through the use of big data to plot insurance strategies.

“Unfortunately, insurers that use AI are going to be subject to some amount of regulatory, litigation and reputational risk,” Kosnoff explained. “To mitigate that risk, insurers should strive to have a good story to tell – one that demonstrates to regulators and other stakeholders that the insurer understands the concerns that have been raised about AI, takes those concerns seriously and is acting with reasonable care to try to avoid negative outcomes.”

Regarding a common approach to regulation standards across the industry and country, Kosnoff noted that “Absent federal legislation, uniform regulation on AI use by insurers is unlikely, but widespread adoption of the NAIC bulletin would establish consistent expectations in the adopting states,” Kosnoff said. “As a practical matter, implementing a thoughtful and credible AI governance/risk management framework should give insurers a good start toward satisfying most of the competing regulatory and legislative proposals.”

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