Navigating the Future: NAIC and State Regulation of Artificial Intelligence in the Insurance Industry


By Sean Cox, President, First Consulting & Administration; and Kathy O’Farrell, Regulatory Affairs Manager, First Consulting & Administration

In the ever-evolving landscape of technology, Artificial Intelligence (AI) is reshaping various sectors, including the insurance industry. AI is transforming areas such as underwriting, customer service, claims, marketing and fraud detection. It has the potential to increase customer engagement, create more personalized service, and to match customers with appropriate products.

As this powerful transformation gains momentum, regulatory bodies like the National Association of Insurance Commissioners (NAIC) and state governments are working diligently to ensure the responsible integration of AI into insurance practices.


The NAIC, comprised of insurance regulators from all 50 states, the District of Columbia, and U.S. territories, has recognized the need for uniform guidelines to govern the use of AI in insurance. The NAIC has studied and reported on the development of AI, its use in the insurance sector, and its impact on consumer protection, privacy, and marketplace dynamics.

At the 2023 Summer NAIC meeting, an exposure draft of a model bulletin on the use of algorithms, predictive models and artificial intelligence systems by insurers was introduced.

Colorado’s Pioneering Efforts in State Regulation:

State level regulations also play a pivotal role in tailoring AI guidelines to local contexts.

Colorado in particular has been at the forefront of AI regulation in the insurance sector. Colorado Regulation 10-1-1 protects consumers, ensures fairness, and requires insurers to create a governance and risk management framework as a first step in integrating AI into insurance practices. This new regulation is effective November 14, 2023.

Life insurers that use external consumer data and information sources as well as algorithms and predictive models must determine whether the use of the data potentially results in unfair discrimination against customers. Insurers are charged with creating policies, systems and controls around data used to supplement or supplant traditional underwriting or other practices such as pricing, marketing, utilization management, reimbursement methodologies and claims management.

  • Examples of external consumer data and information sources include credit scores, social media habits, locations, purchasing habits, home ownership, educational attainment, licensures, civil judgments, court records, occupation that does not have a direct relationship to mortality, morbidity or longevity risk, consumer-generated internet of things data, biometric data, and any insurance risk scores derived by the insurer or third-party from the data. 
  • Moreover, the regulation emphasizes the importance of data privacy, ensuring that customer information utilized by AI systems is safeguarded. 

Challenges and Opportunities:

Despite the invaluable framework that this regulation provides, challenges persist. The dynamic nature of AI technology requires ongoing updates to regulations to ensure their relevance and effectiveness. Striking a balance between encouraging innovation and protecting consumer interests is an ongoing challenge faced by regulators.

However, these challenges also present opportunities. Responsible AI use can enhance customer experience, streamline processes, and mitigate risks, leading to more accurate underwriting and fairer claims assessments. Moreover, by fostering innovation, these regulations encourage the development of AI solutions tailored to the unique needs of the insurance industry.

Looking Ahead:

The collaborative efforts of organizations like the NAIC and proactive states like Colorado reflect a commitment to harnessing the potential of AI while safeguarding consumers’ interests. As technology continues to advance, ongoing dialogue between regulators, insurers, and technology experts is essential. This collaboration will pave the way for a future where AI-driven innovations in the insurance industry are both progressive and responsible, ensuring a win-win scenario for all stakeholders involved.

Published in the Fall 2023 issue of Insights Magazine.

PIMA® (Professional Insurance Marketing Association®) is a member-driven trade association focused exclusively on the affinity market.