NCOIL Resolution Encourages State-Level Regulation of AI Use in Insurance
The National Council of Insurance Legislators (NCOIL) is currently considering a resolution that advocates for state-level regulation of artificial intelligence (AI) in the insurance sector, explicitly discouraging federal oversight. This resolution reflects a growing sentiment among state legislators regarding the need for localized governance in this rapidly evolving field.
Discussion Overview
A draft resolution was discussed on February 19 by the Joint State-Federal Relations & International Insurance Issues Committee, led by Committee Chair and New York Assembly Member Erik Dilan (D-District 54). The resolution emphasizes that the existing state-based regulatory framework established under the McCarran-Ferguson Act has effectively adapted to technological advancements while ensuring consumer protection and marketplace stability.
Opportunities and Risks of AI in Insurance
The resolution outlines the dual nature of AI in the insurance industry, noting that while it offers significant opportunities for efficiency and innovation, it also presents risks related to opacity, data governance, and consumer protections. This nuanced view acknowledges the potential benefits of AI, which is increasingly utilized in various aspects of insurance including:
- Sales
- Marketing
- Underwriting
- Claims handling
- Fraud detection
- Customer engagement
- Customer service
Federal Actions and Concerns
The resolution expresses concern over recent federal actions that aim to limit state legislators’ ability to formulate policies regarding AI in insurance. Notably, it references a proposed 10-year moratorium on state legislative and regulatory authority over AI, as well as a controversial Executive Order that seeks to preempt state legislation.
NCOIL firmly believes that state legislators must retain the authority to craft policies that protect their constituents, who increasingly demand consumer safeguards in light of the uncertainties surrounding AI.
Future Steps
During discussions, Dilan highlighted his previous introduction of an NCOIL Model Act focused on the use of AI in financial services. However, he acknowledged the challenges in gaining consensus for its adoption, leading to a recommendation to pause its development.
This pause allows stakeholders to observe how legislative landscapes evolve across states concerning AI.
Encouragement for State Actions
If the resolution is approved, it will encourage states to:
- Take necessary legislative actions that protect consumers without stifling innovation.
- Implement principles-based regulations that emphasize transparency, accountability, data integrity, and fair discrimination.
- Coordinate efforts to ensure consistency while allowing flexibility to address local market conditions.
Committee Perspectives
While no vote was taken on the resolution during the recent committee meeting, a vote is anticipated in April. Dilan remarked on the importance of this resolution in pushing back against federal overreach, supported by New York Assembly Member Jared Gondalfo (R-District 7), who emphasized the necessity of ongoing discussions about AI due to its rapidly changing nature.
Utah Representative Jim Dunnigan (R-District 36) echoed these sentiments, suggesting that states should act as “laboratories” to determine the best approaches for their unique circumstances.
In summary, the NCOIL resolution represents a significant step towards empowering state legislators to navigate the complexities of AI in the insurance industry while ensuring that consumer protections remain a priority.
