NAIC Principles for the Use of Artificial Intelligence in the Insurance Industry
By: Raffaella Aghemo
Tags: Insurance, Artificial Intelligence, Chatbots, AI, Naic

NAIC Principles for the Use of Artificial Intelligence in the Insurance Industry Raffaella Aghemo Follow Jul 21 · 3 min read

The NAIC (National Association of Insurance Commissioners) is the National Association of Insurance Commissioners operating in the United States: on June 30, it approved the guiding principles, exactly version 5, to be applied in the use of Artificial Intelligence.

Let’s see what they are: in the document it is recommended to all operators, who work in the insurance field, but also to third parties, such as rating and consulting organizations, defined in the text as “AI actors”, to adhere to these fundamental principles, which are complementary to each other and functional to a “trustworthy” Artificial Intelligence.

The AI system should be:

FAIR AND ETHICAL : Operators will have to respect the rule of law, especially with regard to commercial practices, unfair discrimination, access to insurance, underwriting, privacy, consumer protection and eligibility practices, instalment standards, advertising decisions, claims practices and solvency; and shall act proactively, subjecting the use of Artificial Intelligence to supervision, so that such systems are not designed to harm or deceive people and are implemented in a way that minimises negative outcomes for consumers, avoiding harmful or undesirable consequences.

: Operators will have to respect the rule of law, especially with regard to commercial practices, unfair discrimination, access to insurance, underwriting, privacy, consumer protection and eligibility practices, instalment standards, advertising decisions, claims practices and solvency; and shall act proactively, subjecting the use of Artificial Intelligence to supervision, so that such systems are not designed to harm or deceive people and are implemented in a way that minimises negative outcomes for consumers, avoiding harmful or undesirable consequences. RESPONSIBLE : on the same path, constant surveillance of the AI system will be required so that it does not harm or create prejudice to consumers, and if there is no negligence in its creation, monitoring or implementation, the remedy for a possible error must be its correction! An appropriate methodology will have to be put in place, in order to be able to request the review or explanation of the process that led to a given decision, in clear and simple language, also within the reach of non “vertical” consumers on technology.

: on the same path, constant surveillance of the AI system will be required so that it does not harm or create prejudice to consumers, and if there is no negligence in its creation, monitoring or implementation, the remedy for a possible error must be its correction! An appropriate methodology will have to be put in place, in order to be able to request the review or explanation of the process that led to a given decision, in clear and simple language, also within the reach of non “vertical” consumers on technology. COMPLIANT AND CONFORM : always keeping in mind all state and, in the United States, federal regulations, as well as all privacy regulations.

: always keeping in mind all state and, in the United States, federal regulations, as well as all privacy regulations. TRANSPARENT : AI actors must commit to ensuring transparency and responsible disclosure of AI systems to stakeholders, including consumers. Actors must have the ability to protect the confidentiality of proprietary algorithms and adherence to the laws and regulations of individual states. Such proactive disclosures include disclosure of the type of data used, the purpose of the data in the IA system and the consequences for all stakeholders.

: AI actors must commit to ensuring transparency and responsible disclosure of AI systems to stakeholders, including consumers. Actors must have the ability to protect the confidentiality of proprietary algorithms and adherence to the laws and regulations of individual states. Such proactive disclosures include disclosure of the type of data used, the purpose of the data in the IA system and the consequences for all stakeholders. SECURE, RELIABLE AND STRONG: Actors should, based on their role, context and ability to act, apply a systematic approach to risk management, at every stage of the IA system’s life cycle, to address risks such as privacy, digital security and unfair discrimination.

These five proposed principles will be considered by the NAIC’s Innovation and Technology Task Force on July 23rd, and although they will not have the same force of law after publication, they will be a good guide for future initiatives and regulations in the insurance industry!

The insurance industry has significant regulatory aspects, involving privacy, risk management, customer assistance, also through chatbots; therefore, the upcoming introduction of Artificial Intelligence, although aimed at implementing market performance, will involve and require a useful and greater involvement of legal professionals, oriented towards an increasingly technological and digital market.

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Raffaella Aghemo, Lawyer

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