Department of Financial Services releases rules governing AI for insurers
![Department of Financial Services releases rules governing AI for insurers](https://www.insurancenewsmag.com/wp-content/uploads/2024/07/1721102554_Department-of-Financial-Services-releases-rules-governing-AI-for-insurers.jpg)
Department of Financial Services releases rules governing AI for insurers | Insurance Business America
Technology
Department of Financial Services releases rules governing AI for insurers
New rules put new restrictions on carriers
Technology
By
Matthew Sellers
The New York Department of Financial Services (DFS), led by Superintendent Adrienne A. Harris, has issued new guidance to address the use of artificial intelligence (AI) in the insurance industry. The DFS says that the new rule is designed to prevent unfair and unlawful discrimination in underwriting and pricing practices.
“New York has a longstanding tradition of promoting responsible innovation while protecting consumers from financial harm,” Harris said. “This new guidance ensures that AI implementation in insurance does not reinforce systemic biases that lead to discrimination, while also maintaining market stability.”
With the increasing reliance on external consumer data and AI systems, insurers stand to benefit from streamlined and expedited underwriting processes. However legislators feel these technologies also introduce risks of bias that must be managed carefully. The DFS guidance sets clear expectations for carriers in New York State on the integration and oversight of AI and predictive models.
Key Elements of the New Guidance:
Discrimination Prevention: Insurers must rigorously evaluate AI and consumer data to identify and eliminate unfair or unlawful discrimination, in line with state and federal laws.
Actuarial Justification: Companies are required to demonstrate the actuarial validity of their AI systems.
Governance and Oversight: Insurers need to implement a strong corporate governance framework to oversee the outcomes produced by AI and data usage.
Transparency and Controls: There is a mandate for transparency, comprehensive risk management, and internal controls, especially concerning third-party vendors and consumer disclosures.
The DFS developed these guidelines after extensive consultation with regulated entities, trade associations, advisory firms, academic institutions, and the public.
A recent survey by Gradient AI indicated that the industry is rushing headlong into the new tech, with 90% of insurers planning to increase their investments in AI, highlighting its strategic importance. A majority in the survey (75%) are prioritizing AI for underwriting and claims management. The technology aids in optimizing policy pricing, reducing quote turnaround times, efficiently triaging claims, and minimizing both the duration and cost of claims. Additionally, about 25% of insurers are exploring Generative AI, which generates new content based on learned patterns, automating tasks such as summarizing medical notes, drafting routine correspondence, and processing simple applications and claims.
Related Stories
Keep up with the latest news and events
Join our mailing list, it’s free!