NYSDFS Releases Final Guidelines for Insurers on Artificial Intelligence and External Data Usage

NYSDFS issued a final circular on July 11, 2024, about using AI systems and external data in insurance.

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The circular outlines significant obligations for insurers using AI and external data for underwriting and pricing.

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It applies to insurers authorized in New York, Article 43 corporations, HMOs, licensed fraternal benefit societies, and the New York Insurance Fund.

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The guidance aims to address concerns about potential unfair impacts and discriminatory practices from these technologies.

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AI systems are defined as machine-based systems performing tasks related to human intelligence, used in underwriting and pricing.

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External consumer data includes information used to supplement traditional underwriting or pricing, but excludes certain data types.

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Insurers must comply with local, state, and federal laws, ensuring no unfair discrimination in their use of AI and external data.

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A corporate governance framework must be established, including policies, procedures, and risk management for AI and data systems.

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Insurers must have board oversight and senior management responsible for AI and data systems implementation.

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Transparency is required, with insurers disclosing the use of AI and external data to customers and their rights to request specific information.

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