New York continues to be a hotbed of artificial intelligence (AI) regulations and laws. Adrienne A. Harris, Superintendent of the New York Department of Financial Services (DFS), adopted new guidance aimed at protecting consumers from unfair and unlawful discrimination by insurers using AI. This move underscores New York’s commitment to supporting responsible innovation while ensuring consumer protection in the financial sector.
“New York has a strong track record of supporting responsible innovation while protecting consumers from financial harm,” said Superintendent Harris. “Today’s guidance builds on that legacy, ensuring that the implementation of AI in insurance does not perpetuate or amplify systemic biases that have resulted in unlawful or unfair discrimination, while safeguarding the stability of the marketplace.”
The new guidance specifically addresses the use of external consumer data and information sources (ECDIS) and AI systems (AIS) by insurers. While these technologies can simplify and expedite insurance underwriting and pricing processes, they also carry the potential for significant consumer harm if not properly managed. The guidance mandates that insurers establish robust governance and risk management frameworks to mitigate these risks.
Under the DFS’s new guidelines, insurers authorized to operate in New York State are expected to adhere to several critical requirements. Firstly, insurers must rigorously analyze their use of External Consumer Data and Information Sources (ECDIS) and Artificial Intelligence Systems (AIS) to ensure these technologies do not lead to unfair or unlawful discrimination. This analysis must comply with both state and federal laws, aiming to prevent systemic biases that could harm consumers.
Additionally, insurers are required to demonstrate the actuarial validity of their ECDIS and AIS. This means these systems must be fair and based on sound statistical principles. By proving the actuarial validity, insurers can show that their AI-driven decisions are not only accurate but also justifiable and reliable.
Insurers must also establish and maintain a robust corporate governance framework. This framework should provide appropriate oversight of the insurer’s use of ECDIS and AIS, ensuring accountability and transparency throughout the organization. Such governance is crucial in overseeing the ethical deployment of AI technologies and in making sure that the outcomes of these systems align with the company’s values and regulatory requirements.
Finally, the guidelines mandate that insurers ensure transparency and implement comprehensive risk management practices. This includes maintaining strong internal controls and managing risks associated with third-party vendors. Insurers must also be transparent with consumers, providing clear disclosures about how their data is used and protected. This approach aims to build trust and protect consumers from potential misuse of their personal information.
The DFS developed this guidance after carefully considering feedback from various stakeholders, including regulated entities, trade associations, advisory firms, universities, and the general public. This inclusive approach highlights the department’s commitment to developing balanced and effective regulatory frameworks.
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If you have questions or concerns about navigating New York’s AI regulations, or any other U.S. and global AI regulatory landscape, don’t hesitate to reach out to BABL AI. Their Audit Experts can offer valuable insight, and ensure you’re informed and compliant.
