Insurance AI Governance Guide

Navigate AI governance for insurance operations. Covers NAIC Model Bulletin, state unfair discrimination laws, and Colorado SB 21-169. Includes underwriting, pricing, and claims-specific requirements with proxy discrimination testing guidance and actuarial standards.

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Key Insights

Insurance is one of the most heavily regulated industries for AI use. Insurers face overlapping requirements from the NAIC, state insurance commissioners, and general AI laws like Colorado's AI Act. The NAIC Model Bulletin on AI (December 2023) is being adopted by states, creating governance requirements for AI affecting underwriting, pricing, and claims.

This guide provides insurers with a practical compliance framework: classify your AI use cases, assess NAIC Model Bulletin requirements, evaluate state-specific obligations, and identify gaps requiring remediation.

Overview

Insurance AI regulation is accelerating. The NAIC Model Bulletin sets expectations states are adopting. Colorado has specific insurance AI requirements. State unfair trade practices acts prohibit AI discrimination. Rate filing requirements increasingly require AI disclosure. Insurers need to understand what applies and prepare for compliance.

This guide provides a structured approach to insurance AI governance. Work through it to understand your requirements and identify compliance gaps.

What's Inside

Regulatory Landscape Overview

NAIC Model Bulletin (December 2023): "Use of Artificial Intelligence Systems by Insurers"
Colorado SB 21-169: First state law specifically addressing AI in insurance
State Unfair Trade Practices Acts: Prohibit unfair discrimination
State Rate Filing Requirements: AI disclosure requirements
Colorado AI Act (February 2026): Broad AI requirements applying to insurers

1. AI Use Case Classification
Insurance function classification with risk levels:

HIGH RISK: Underwriting decisions, premium pricing/rating, claims adjudication
MEDIUM RISK: Fraud detection/SIU, risk selection/appetite scoring
LOWER RISK: Marketing/segmentation, customer service, loss forecasting, document processing

2. NAIC Model Bulletin Requirements
Governance & Risk Management:

Written AI governance program
Board/senior management oversight
Enterprise risk management integration
Policies for AI development, acquisition, use
Ongoing monitoring and validation procedures
Clear accountability and roles

Third-Party AI/Vendor Management:

Due diligence requirements
Contractual provisions
Ongoing monitoring

Unfair Discrimination Prevention:

Testing for proxy discrimination
Disparate impact analysis
Documentation requirements

3. State-Specific Requirements

Colorado SB 21-169 compliance checklist
State adoption status of NAIC Model Bulletin
Rate filing AI disclosure requirements
State-specific unfair trade practices considerations

4. Unfair Discrimination Testing

Testing methodology for protected classes
Proxy variable identification
Disparate impact analysis
Documentation for regulatory examination

5. Adverse Consumer Impact Assessment

Consumer harm identification
Mitigation requirements
Appeals and human review processes
Notification obligations

6. Documentation Requirements

Governance program documentation
Testing records
Vendor due diligence files
Regulatory examination preparation

Who This Is For

Chief AI Officers in insurance companies
Chief Compliance Officers managing regulatory requirements
Chief Actuaries validating rating AI
Underwriting Leaders using AI in underwriting
Claims Leaders implementing claims AI

Why This Resource

Insurance AI governance has industry-specific requirements that generic frameworks don't address. NAIC Model Bulletin compliance, state insurance law requirements, and rate filing considerations require insurance-specific guidance. This guide addresses what insurance regulators expect.

Use case classification helps you quickly identify which AI applications trigger the most stringent requirements.

FAQ

Q: Which states have adopted the NAIC Model Bulletin?

A: Adoption is ongoing. The guide provides a framework for checking your states of operation against current adoption status. Requirements vary by state adoption approach.

Q: What about AI from InsurTech vendors?

A: Third-party AI requirements are covered in detail—due diligence, contractual requirements, and ongoing monitoring. You're responsible for vendor AI governance under NAIC guidance.

Q: How do we test for unfair discrimination?

A: The unfair discrimination testing section provides methodology for protected class analysis, proxy variable identification, and disparate impact testing—the testing regulators expect for rating and underwriting AI.