The North Dakota Insurance and Securities Department published a bulletin reminding insurers that the use of AI and other advanced analytical and computational tools must comply with state insurance laws and regulations.
The Department stresses that the method of decision-making used does not change what is required by the regulatory rules. Decisions supported by AI must comply with all applicable laws and regulations, including the following:
- AI cannot be used to engage in unfair methods of competition, unfair or deceptive acts, or unfair claims settlement practices
- AI-derived rates must be just, fair, reasonable, and adequate
These laws apply regardless of the methods used to derive them, including AI and AI systems. Insurers should ensure the use of such systems does not violate the principles of the unfair discrimination laws, and rates developed using AI systems should not be in violation of the rating laws.
Insurers are expected to develop and implement a written AIS Program for the responsible use of AI Systems. The bulletin outlines a series of general guidelines for AIS programs that includes addressing governance, risk management controls, audit functions, how AI is used with the Enterprise Risk Management System, how the AIS will address all phases of the system's life cycle, and others.
The bulletin can be found here.
Ray Sugrim
Ray Sugrim is an Insurance Editor with FC&S Expert Coverage Interpretation, a division of National Underwriter Company and Arc Network. Ray is responsible for helping develop and edit content for subscribers. Ray is a St John’s University graduate with a degree in Risk Management & Insurance and is a CPCU candidate.