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July 15, 2024

Why Do AI

Artificial Intelligence Insights and News

The AI Revolution in Insurance: Part V

2 min read

The regulatory framework for AI in insurance, as outlined in the NAIC Model Bulletin, is anchored on several key principles. These include transparency, fairness, non-discrimination, and accountability. Insurers are expected to not only implement AI systems that adhere to these principles but also to demonstrate their commitment through clear documentation and policies. This includes explaining the decision-making processes of AI systems, ensuring they are free from unfair biases, and maintaining robust data governance practices.

Operationalizing Regulatory Expectations

Operationalizing these expectations involves a multi-faceted approach. Insurers must establish internal policies and governance structures that oversee AI deployment. This includes regular audits and reviews of AI systems to ensure compliance with both ethical standards and regulatory requirements. Furthermore, insurers need to develop protocols for addressing any issues identified during these reviews, including modifying or discontinuing AI applications that fail to meet the established standards.

Oversight and Examination Considerations

Preparing for Regulatory Scrutiny

As AI becomes more ingrained in insurance practices, insurers can expect increased regulatory scrutiny. This may involve detailed examinations of the data used in AI models, the algorithms themselves, and the decision-making processes they inform. Insurers should be prepared to provide comprehensive documentation and explanations of their AI systems. This includes ensuring the traceability of decisions made by AI systems and being able to demonstrate the steps taken to mitigate risks associated with AI, such as data breaches or biased outcomes.

The final section will conclude with a future outlook, discussing the ongoing evolution of AI in insurance and the potential regulatory and technological trends on the horizon.