NAIC using evaluation tool pilot to monitor insurance AI use

The National Association of Insurance Commissioners (NAIC) has rolled out an AI Evaluation Tool pilot program to help regulators understand how insurers use AI in 12 states. 

The program started in March and will run to September. 

“It provides a structured way for states to review AI systems, promote transparency, and identify where additional oversight, training, or improvements may be needed,” an NAIC document states. 

States included in the pilot are:

• • California
  • Iowa
  • Rhode Island
  • Colorado
  • Louisiana
  • Vermont
  • Connecticut
  • Florida
  • Maryland
  • Pennsylvania
  • Virginia
  • Wisconsin

Each of the states have agreed to develop and release a project summary. Each state also plans to meet monthly to share progress and will report during the NAIC’s summer national meeting and at interim meetings as the pilot advances. 

The pilot is intended to determine whether the tool helps insurers clearly explain their AI governance systems to regulators. It also is intended to help create long-term recommendations for market conduct and financial risk assessment review processes. 

“Pilot states will use the tool in different types of work, including market conduct exams and reviews, financial analysis, and financial exams,” the NAIC document states. “Among the states piloting the tool, some variation will occur in implementation. For example, questions in the tool may be adapted to meet specific jurisdictional needs.” 

Insurance companies from different lines of business will be observed in the pilot, including property/casualty, life, and health insurance. 

Each state has the duty to communicate with each company to explain the purpose of both the tool and the pilot project. 

NAIC plans to update the tool based on pilot feedback and issue it again for review in September or October. It could consider the updated tool for adoption at the fall national meeting. 

The NAIC Big Data and Artificial Intelligence Workgroup plans to work on multiple AI projects this year. 

This includes researching the use of big data and AI in the business of insurance, monitoring state, federal and international activities on AI, including updates to the regulatory framework for the oversight of AI. 

NAIC says it will also support the adoption for the Model Bulletin on the Use of AI systems by Insurers, which 25 states have adopted as of March 3.

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