NYDFS issues guidelines for insurance companies' use of AI

Applications of AI

New York State Department of Financial Services (DFS) Commissioner Adrienne A. Harris said on Thursday (July 11) that insurance companies' use of artificial intelligence (AI) must not discriminate against consumers.

Harris made the remarks in a press release announcing that DFS had adopted guidelines for insurers that use AI in underwriting and pricing.

“New York State has a proven track record of supporting responsible innovation while protecting consumers from financial harm,” Harris said. “Today's guidance builds on that track record, ensuring that the adoption of AI in the insurance industry does not perpetuate or amplify systemic biases that lead to illegal or unjust discrimination, while at the same time protecting market stability.”

According to the announcement, the DFS guidance outlines expectations for how insurers writing insurance in the state may use external consumer data and information sources (ECDIS), artificial intelligence systems (AIS), and other predictive models.

It has been announced that insurers are required to analyse whether ECDIS and AIS are being used in their development and management for unfair and unlawful discrimination, to demonstrate actuarial validity, and to properly monitor the overall results of their use.

Insurers are also required to maintain appropriate transparency, risk management and internal controls in both their own operations and those of their third-party vendors, according to the press release.

According to the announcement, the adoption of the guidelines builds on a statewide policy governing AI that New York Governor Kathy Hochle announced in January.

According to a press release issued at the time, the policy is intended to ensure state agencies know how to “responsibly leverage the opportunities of AI technologies.”

“The establishment of our first statewide policy governing AI provides a roadmap for maximizing the benefits of this rapidly evolving technology while mitigating the risks, complementing the great work our officials are already doing for the benefit of New Yorkers,” Drew Lai, chief information officer and director of the New York State Department of Information Technology Services, said in a statement.

In October 2023, New York City Mayor Eric Adams and Chief Technology Officer Matthew Fraser announced the city's artificial intelligence (AI) action plan, saying it would protect against potential risks from AI and develop tools and knowledge to help city employees leverage AI technology.

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