An ethical insurtech advocacy group is questioning a group of U.S. state regulators' plans to define a key aspect of AI regulation – defining third-party data and models.
The National Association of Insurance Commissioners (NAIC) Third-Party Data and Models Working Group decided at its May 22 meeting to set these definitions that will be needed for AI models that are more dynamic and require a different framework.
State insurance regulators will need the definitions because most just have experience regulating traditional predictive or deterministic models, as Gennady Stolyarov, lead actuary, property and casualty insurance at the Nevada Division of Insurance, stated, according to minutes of the working group's meeting.
The American InsurTech Council (AITC), a group advocating for development of ethical, technology-driven innovation in insurance, calls the NAIC working group's efforts unfocused and potentially detrimental.
"It is easily foreseeable that an ambiguous or imprecise definition could create regulatory inconsistency and uncertainty involving differing interpretations across states, confusion and disputes over what entities or use cases are included, and other uncertainties in the marketplace regarding regulatory requirements," stated Scott Harrison, co-founder of AITC, in an email response to questions. "Introducing this level of uncertainty is unnecessary, will create gaps that could potentially harm consumers, stifle innovation, increase costs, and distract from the development of highly focused regulatory standards."
NAIC has not identified a specific purpose for setting definitions of third-party data and models, Harrison wrote in a June 23 letter to working group chair Jason Lapham, deputy commissioner for property and casualty insurance at the Colorado Division of Insurance.
"At a time of rapid change in technology and the development of business use cases for AI that benefit consumers, we would be concerned that attempts to parse descriptions of these services into rigid definitions would undermine the dynamic, rapidly evolving and innovative nature of third-party services to insurers," Harrison wrote in the letter. "Rigid definitions would also create confusion in contracting and compliance efforts, impose unnecessary regulatory burdens, and create the conditions for inconsistent interpretations across the states."
Harrison has said that
In the working group's meeting,
NAIC's Big Data and Artificial Intelligence Working Group is asking who should be responsible for the accuracy of data from third parties. Shannen Logue, deputy commissioner of product regulation, Pennsylvania Insurance Department, said accountability and transparency are essential when working with third parties, according to minutes of the May 22 meeting.
