AITC Proposes Comprehensive AI Oversight Framework for Insurers
The American InsurTech Council (AITC) has taken a significant step toward ensuring responsible use of artificial intelligence (AI) in the insurance industry. In a move that could reshape how insurers handle third-party data and predictive models, the AITC has submitted a detailed regulatory framework proposal to the National Association of Insurance Commissioners (NAIC) Third Party Data and Models Task Force. This proposal aims to address the growing influence of AI technologies, including generative AI, while maintaining compliance with existing insurance laws and regulations.
What Is the AITC’s Proposal All About?
The AITC’s framework introduces an “attestation model” that would require insurers to confirm annually that their use of AI aligns with the NAIC’s Model AI Bulletin. This bulletin, adopted in December 2023, outlines a risk-based governance approach for AI use in the insurance sector. The attestation model is designed to enhance regulatory oversight, protect consumers, and ensure that insurers remain accountable for the third-party data and models they use.
In a letter to the NAIC Task Force, the AITC stated, “Our proposal introduces an attestation model framework designed to ensure that insurers using AI from third-party providers comply with regulatory guidance as outlined in the Model AI Bulletin.”
Key Features of the Framework
The AITC’s proposal is built on several core principles aimed at fostering consistency with the NAIC’s risk-based approach. These principles include:
- Ensuring that insurers are ultimately responsible for compliance with insurance laws when using third-party vendors.
- Protecting consumers from potential risks associated with AI-driven decisions.
- Maintaining effective regulatory oversight to manage the rapid advancements in AI technologies.
The framework also emphasizes flexibility and durability, allowing it to adapt to the fast-paced evolution of AI in the insurance industry. According to the AITC, the model provides clear regulatory guidance for third-party vendors, ensures equal accessibility for insurers of all sizes, and promotes continued innovation in the ethical and fair use of AI.
Research and Collaboration
To develop this comprehensive framework, the AITC conducted extensive research and consultations with various stakeholders, including insurance carriers, third-party vendors, and risk management specialists. The council noted that many insurers already have third-party risk management strategies in place, which can be adapted to address AI-related risks.
“The framework provides a clear statement to third-party vendors regarding regulator expectations, strengthening insurers’ ability to secure appropriate contract language and oversight,” the AITC explained.
How the Attestation Model Works
Under the proposed framework, insurers would be required to attest annually to regulators that their use of AI complies with applicable laws. This includes ensuring that AI-driven decisions align with key regulations such as the Unfair Trade Practices Act and the Unfair Claims Settlement Practices Act. The model also extends current regulatory principles, such as:
- Conducting due diligence on third-party vendors.
- Including contract provisions for audit rights.
- Cooperating with regulator inquiries.
The AITC believes that many insurers are already taking proactive steps to adapt their risk management programs for AI oversight. The attestation model builds on these efforts, offering a practical and scalable solution that can be implemented quickly to address the rapid expansion of AI in the insurance sector.
Long-Term Applicability
One of the standout features of the AITC’s proposal is its focus on long-term applicability. The framework accommodates emerging certification and accreditation programs for third-party vendors and AI systems, ensuring that it remains relevant without requiring frequent updates. This approach aligns with existing regulatory practices, providing insurers with a consistent method for managing risks associated with third-party AI.
The AITC emphasized that the framework supports the continued development of best practices and fosters confidence in the insurance industry’s use of advanced technologies. “We look forward to discussing our proposal further with Task Force members,” the council stated, adding that it welcomes collaboration to refine the framework and advance regulatory strategies for AI in insurance.
Why This Matters
The insurance industry is increasingly relying on AI to streamline operations, improve customer experiences, and make data-driven decisions. However, the rapid adoption of AI also brings challenges, including ethical concerns, potential biases in decision-making, and compliance with existing laws. The AITC’s proposed framework addresses these challenges head-on, offering a structured approach to managing AI-related risks while promoting innovation.
By requiring insurers to take accountability for their use of third-party data and models, the framework ensures that consumer protection remains a top priority. It also provides regulators with the tools they need to oversee the responsible use of AI in the industry.
Looking Ahead
As AI continues to evolve, the insurance industry must adapt to keep pace with technological advancements. The AITC’s proposal represents a significant step forward in this journey, offering a roadmap for responsible AI use that balances innovation with accountability. If adopted, the framework could serve as a model for other industries grappling with the challenges and opportunities of AI.
For now, all eyes are on the NAIC Task Force as it reviews the AITC’s proposal. The outcome of this review could have far-reaching implications for the future of AI in insurance and beyond.
Originally Written by: Kenneth Araullo
