NYDFS Issues Guidance for Insurance Companies’ Use of AI

Insurers’ use of artificial intelligence (AI) must not discriminate against consumers, New York State Department of Financial Services (DFS) Superintendent Adrienne A. Harris said Thursday (July 11).

Harris said this in a press release announcing the DFS’s adoption of guidance for insurers that use AI in underwriting and pricing.

“New York has a strong track record of supporting responsible innovation while protecting consumers from financial harm,” Harris said. “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 DFS’s guidance outlines its expectations for how insurers that write insurers in the state will use external consumer data and information sources (ECDIS), artificial intelligence systems (AIS) and other predictive models, according to the release.

When developing and managing ECDIS and AIS, insurers are expected to analyze them for unfair and unlawful discrimination, demonstrate their actuarial validity and provide appropriate oversight of the overall outcome of their use, the release said.

Insurers are also expected to maintain appropriate transparency, risk management and internal controls over both their own operations and those of third-party vendors, per the release.

The adoption of this guidance builds upon a statewide policy governing AI that was announced in January by New York Governor Kathy Hochul, according to the release.

That policy aims to ensure that state government agencies understand how to “responsibly harness the opportunity of AI technology,” according to a press release issued at the time.

“The establishment of the first-ever statewide policy governing AI will serve as a roadmap to leverage this rapidly emerging technology to find maximum benefit while mitigating risk, and complement the extraordinary work our employees are already doing to benefit the people of New York,” Dru Rai, chief information officer and director of the New York State Office of Information Technology Services, said in the release.

In October 2023, New York City Mayor Eric Adams and Chief Technology Officer Matthew Fraser announced the release of the city’s Artificial Intelligence (AI) Action Plan, saying it will help protect against the potential risks of AI while developing tools and knowledge to help city government employees use the technology.