Colorado Commissioner Approves Regualtion 10-1-1 for Insurers
While New York City positions itself as a focal point for AI regulation in the United States, another state takes the lead in regulating AI within the insurance industry. The Commissioner of the Colorado Division of Insurance, operating under the Department of Regulatory Agencies, has officially adopted Regulation 10-1-1, outlining Governance and Risk Management Framework Requirements for Life Insurers’ Utilization of External Consumer Data and Information Sources, Algorithms, and Predictive Models. This regulation mandates that life insurers authorized to operate in Colorado establish and maintain a risk-based governance structure and risk management framework when employing external consumer data and information sources, algorithms, and predictive models.
Under Regulation 10-1-1, insurers are compelled to document governing principles that articulate values and objectives while demonstrating how algorithms and predictive models, utilizing external consumer data and information sources, are reasonably designed to prevent unfair discrimination. Oversight of this framework must rest with the board of directors or a board committee. Senior management holds responsibility and accountability for the overall strategy, providing direction governing the use of algorithms and predictive models, ensuring clear lines of communication, and delivering regular reporting. A documented cross-functional governance group, comprising representatives from key areas such as legal, compliance, risk management, product development, underwriting, actuarial, data science, marketing, and customer services, is also required.
Insurers must meticulously document policies, processes, and procedures governing the design, development, testing, deployment, use, and ongoing monitoring and testing of algorithms and predictive models. They are further obligated to establish and maintain a risk management framework for continuous monitoring and testing of models and data sources, as well as implementing controls to mitigate identified risks. Providing training and education to employees involved in the design, development, use, and ongoing monitoring and testing of data, algorithms, and predictive models is another stipulation.
Crucial to Regulation 10-1-1 are reporting requirements. Insurers are expected to submit a narrative report summarizing their progress toward compliance by June 1, 2024. Additionally, an annual narrative report outlining compliance with the regulation’s requirements is mandatory. If an insurer cannot attest to compliance, it must submit a corrective action plan. Exempt insurers, not subject to the regulation’s requirements, must submit an exemption report annually on December 1, indicating that they do not utilize data, algorithms, and/or predictive models. The regulation takes effect on November 14, 2023.
For insights into how Colorado’s Regulation 10-1-1 might impact your business, reach out to BABL AI. Their team of Audit Experts can address your questions and concerns related to this regulation and other AI-related regulations.
