Final week, each the New York Division of Monetary Providers (“DFS”) and the Nationwide Affiliation of Insurance coverage Commissioners (“NAIC”) acted on official steering pertaining to accelerated underwriting by life insurance coverage firms. DFS formally adopted Insurance Circular Letter No. 7 (2024), which establishes ideas for when insurance coverage carriers use synthetic intelligence in underwriting and pricing, and clarifies the pre-existing Insurance Circular Letter No. 1 (2019), which mainly issues exterior knowledge sources and “expedited, accelerated or algorithmic underwriting course of[es] in lieu of a standard medical underwriting.”[1] The NAIC’s Accelerated Underwriting (A) Working Group met the following day to contemplate feedback on its beforehand uncovered Regulatory Guidance and a referral for the Market Regulation Handbook. The working group uncovered for public remark a revised steering doc for a two-week remark interval that’s presumably the ultimate model earlier than adoption at subsequent month’s Summer time Nationwide Assembly.
New York DFS
In January this 12 months, DFS issued the proposed round letter for public remark. That public remark interval closed in mid-March and DFS has now adopted a revised model. The clarification of Circular Letter No. 1 (2019) through Circular Letter No. 7 (2024) ties the 2 round letters collectively underlining the emphasis on exterior knowledge sources in underwriting. Life insurers utilizing exterior shopper knowledge and data sources (“ECDIS”), and synthetic intelligence techniques (“AIS”), for accelerated or algorithmic underwriting ought to disclose any threshold standards in related commercials and advertising and marketing supplies and in disclosures supplied to shoppers through the software course of. Moreover, candidates who should not accepted for insurance coverage or will probably be submitted to extra underwriting have to be knowledgeable of (i) the rationale, (ii) whether or not the rejection is “primarily based on particular ECDIS knowledge,” and (iii) a “course of to evaluate [the data] for accuracy.”[2]
NAIC Working Group
The Accelerated Underwriting (A) Working Group uncovered for a two-week public remark interval ending Friday July 26, 2024, what’s presumed to be the ultimate draft of the working group’s Regulatory Guidance, to be adopted on the NAIC Summer time Nationwide Assembly subsequent month in Chicago. The steering features a background part explaining the historical past of growth of the steering and supplies context with different NAIC supplies on associated subjects reminiscent of synthetic intelligence, predictive modeling, and third-party knowledge. The steering doc does NOT present steering to insurance coverage carriers however somewhat recommendations to insurance coverage regulators when reviewing life insurance coverage carriers’ use of accelerated underwriting. The steering is intently aligned with the NAIC AI Model Bulletin,[3] particularly on (i) an emphasis on outcomes that aren’t “unfairly discriminatory”; (ii) a required mechanism for shoppers to problem knowledge factors and to right errors if confirmed; and (iii) required procedures for validating, testing, and/or auditing knowledge units, together with these supplied by third-party distributors. The working group additional revised a draft referral to the Market Conduct Examination Tips (D) Working Group relating to steered additions to the NAIC Market Regulation Handbook.
Locke Lord will proceed to watch developments on the NAIC and state insurance coverage departments. If in case you have any questions or issues please contact the writer or your Locke Lord associate.
[1] N.Y. DEPT. OF FIN. SERV., Round Letter No. 1 (2019), Re: Use of Exterior Client Knowledge and Data Supply in Underwriting for Life Insurance coverage (January 18, 2019) accessible here.
[2] N.Y. DEPT. OF FIN. SERV., Round Letter No. (2024), Re: Use of Synthetic Intelligence Methods and Exterior Client Knowledge and Data Sources in Insurance coverage Underwriting and Pricing (July 11, 2024) accessible here.
[3] NAIC Mannequin Bulletin: Use of Synthetic Intelligence Methods by Insurers, adopted in December 2023.
