PriyaPatel
TLDR:
- The Department of Financial Services in New York has released new rules governing the use of artificial intelligence (AI) in the insurance industry to prevent discrimination in underwriting and pricing practices.
- The new guidelines set expectations for insurers on discrimination prevention, actuarial justification, governance and oversight, transparency, and controls in the use of AI systems.
The New York Department of Financial Services (DFS) has issued new guidance to address the use of artificial intelligence (AI) in the insurance industry. The new rule is designed to prevent unfair and unlawful discrimination in underwriting and pricing practices. Superintendent Adrienne A. Harris stated that the new guidance aims to promote responsible innovation while protecting consumers from financial harm. The guidance sets expectations for carriers in New York State on the integration and oversight of AI and predictive models.
Key elements of the new guidance include:
- Discrimination Prevention: Insurers must evaluate AI and consumer data to eliminate unfair or unlawful discrimination.
- Actuarial Justification: Companies must demonstrate the actuarial validity of their AI systems.
- Governance and Oversight: Insurers need to implement strong corporate governance to oversee the outcomes produced by AI and data usage.
- Transparency and Controls: Mandate for transparency, risk management, and internal controls, especially concerning third-party vendors and consumer disclosures.
The DFS developed these guidelines after consultation with various entities and the public. A survey by Gradient AI showed that insurers are increasing their investments in AI, with a focus on underwriting and claims management. The technology helps in optimizing policy pricing, claims processing, and efficiency. Some insurers are also exploring Generative AI for automating tasks such as summarizing medical notes and processing claims.
Overall, the new rules aim to ensure that AI implementation in insurance does not reinforce systemic biases and discrimination, while also promoting market stability.
