The National Association of Insurance Commissioners Executive Committee and plenary approved a model bulletin on the use of algorithms, predictive models and artificial intelligence by insurers that includes the word “bias,” which trade groups said does not meet the legal standard used by the industry.
In so doing, the NAIC leadership followed the path chosen by the Innovation, Cybersecurity and Technology (H) Committee, which discussed deleting the term, changing it to “unfair discrimination” or modifying it to “statistical bias.”
In the end, the committee, which met Dec. 1, decided to leave the document unchanged in the interest of getting important guidance to the states.
Committee Chair Kathleen Birrane said at the executive committee/plenary meeting that the bulletin was created in a “highly collaborative” process, with amended drafts exposed in July and October and discussed in November.
“We felt that we had worked pretty closely with our NAIC actuaries and with others to be very precise about the terms that we were using, and we felt that it was not necessary to bring in a new definition of the word bias,” she said.
She emphasized that the bulletin is “interpretive.”
The National Association of Mutual Insurance Companies was concerned with a number of terms in the draft, including “bias” in testing AI and predictive models, said Erin Collins, senior vice president, state and policy affairs.
“Our biggest concern is that there are terms in the model bulletin that are not consistent with current law,” Collins said. “Having a standard on the basis of bias when bias is not the standard of law in insurance is a source of great concern.”
The NAIC should stick with the current controlling legal framework for P/C companies that rates must not be excessive, inadequate, or unfairly discriminatory, NAMIC said in comments to the NAIC.
Also at the executive committee/plenary meeting, members approved a pet insurance market conduct annual statement data call. Data on underwriting, claims, and lawsuits among other things will be collected throughout 2024, it said. The first filing deadline will be April 30, 2025.
The executive committee/plenary also signed off on a $154 million budget for 2024 with seven fiscal impact statements, mostly focusing on enhanced technology. Total revenues are about $9.4 million, or about 6.5% over the 2023 total revenue figure. Operating expenses are projected to be $158.8 million, it said.
The NAIC also approved its officers for 2024 at the meeting. They are: President: Andrew Mais, Connecticut insurance commissioner; President-Elect: Jon Godfread, North Dakota insurance commissioner; Vice President: Scott White, Virginia insurance commissioner; and Secretary-Treasurer: Elizabeth Kelleher Dwyer, director of Rhode Island’s Department of Business Regulation.