State insurance regulators pursue more data on industry use of AI

State insurance regulators are finishing up an industry survey to learn how home insurers are using artificial intelligence and machine learning.

Next up, a similar survey of life insurers will be sent to 192 companies on Friday, March 31, said Kevin Gaffney, commissioner of the Vermont Department of Financial Regulation. Gaffney reported updates on the effort Wednesday to the Big Data and Artificial Intelligence Working Group.

The group, a member of the National Association of Insurance Commissioners, released its initial survey results of auto insurers in December. The NAIC held its spring meeting this week in Louisville, Kent.

That survey found that 88% of auto insurers currently use, plan to use or plan to explore using artificial intelligence or machine learning as part of their everyday operations.

The surveys are part of a wide-ranging effort on the part of several NAIC groups to get a better grasp on artificial intelligence and big data usage in insurance.

Referencing the home insurer survey, Gaffney said state insurance regulators want "to gain a better understanding of the industry's use of big data, artificial intelligence machine learning, and what governance risk management and controls are in place in developing and managing those activities.

"The survey also seeks to gather information that may inform the development or guidance of a potential regulatory framework that would support the industry's use of big data and AI/ML in accordance with the expectations outlined in the NAIC's artificial intelligence principles."

Final request

The home survey was sent to 194 insurers, Gaffney said, with a due date of Dec. 15. Regulators were waiting for responses from eight insurers as of this week, the final deadline. NAIC regulators will immediately begin compiling the results into a report similar to the auto insurer report, Gaffney said. That report will be presented during the NAIC summer meeting.

The life survey was sent to insurers with more than $250 million in premiums in all individual policies in 2021, term writers that issued policies on more than 10,000 lives, or "specifically selected" insuretech companies, Gaffney said.

A survey link for life insurer respondents will go live March 31 and regulators want to have all responses back by the end of May, he added.

"Our goal with the life survey is to learn directly from industry about what is happening in this space to get a sense of the current level of risk and exposure associated with their use of AI and ML, and how the industry is managing or mitigating that risk," Gaffney said.

Artificial intelligence principles

In August 2020, the NAIC adopted guiding principles on artificial intelligence.

There are numerous examples of how big data algorithms discriminate against communities of color. For example, a 2018 study by Consumer Reports and ProPublica found disparities in auto insurance prices between minority and white neighborhoods that could not be explained by risk alone.

The NAIC guiding principles are based on the Organization for Economic Co-operation and Development’s AI principles that have been adopted by 42 countries, including the United States.

After robust discussions, state insurance regulators added a principle encouraging industry participants to take proactive steps to avoid proxy discrimination against protected classes when using AI platforms.

InsuranceNewsNet Senior Editor John Hilton covered business and other beats in more than 20 years of daily journalism. John may be reached at [email protected]. Follow him on Twitter @INNJohnH.

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InsuranceNewsNet Senior Editor John Hilton has covered business and other beats in more than 20 years of daily journalism. John may be reached at [email protected]. Follow him on Twitter @INNJohnH.