AI Update: Challenges to the One Big Beautiful Bill Act
The One Big Beautiful Bill Act (“OBBA”), which proposes a 10-year freeze on new state-level artificial intelligence regulations while suspending the enforcement of existing ones, is currently facing challenges from several state insurance commissioners. Their concerns center around the bill’s broad definition of AI, which they argue is too expansive.
Concerns Over the Definition of AI
Insurance commissioners have raised alarms that the language within the OBBA could extend beyond machine learning systems to encompass common data tools and software that are regularly utilized by insurers. If the bill is enacted in its current form, this could potentially stifle regulators’ abilities to monitor and address emerging issues associated with technologies that do not strictly fall under the category of AI.
The Impact on Regulatory Practices
Furthermore, the commissioners contend that the moratorium outlined in the bill would interfere with recognized oversight practices that support fairness and transparency in insurance pricing and underwriting. This interference could jeopardize compliance with nondiscrimination standards.
As the use of predictive analytics becomes increasingly prevalent in the industry, restricting oversight could erode vital safeguards. The inability to adjust regulatory frameworks in response to the growing influence of AI in insurance may hinder state-level supervision and consumer protection efforts.
Potential Disruptions to the Insurance Regulatory System
A letter from the commissioners warned that the proposed 10-year freeze could disrupt the established state-based insurance regulatory system. This disruption might result in uncertainty for insurers, delay critical consumer protection initiatives, and complicate business decisions due to a lack of clarity surrounding compliance and enforcement.
Ultimately, the leadership of the National Association of Insurance Commissioners (NAIC) has urged lawmakers to either remove or amend the AI provision in the proposed bill. They also suggested that the Senate should consider exempting the insurance sector if the provision moves forward.
Legal Implications
Moreover, the commissioners indicated that if enacted, the provision is likely to face challenges under the McCarran-Ferguson Act, which prohibits federal laws from overriding state insurance regulations. They emphasized that until a legal ruling is made, insurers will operate under uncertain conditions, facing unclear regulatory expectations and potential exposure to litigation.
Legislative Progress
The OBBA successfully passed the House of Representatives on May 22, 2025, with a narrow party-line vote of 215–214–1. The ongoing debate surrounding this bill highlights the complexities of regulating rapidly evolving technologies like AI within the insurance industry.
