Washington – On August 14, 2020, members of the National Association of Insurance Commissioners (NAIC) unanimously adopted guiding principles on artificial intelligence (AI) emphasizing the importance of accountability, compliance, transparency, and safe, secure and robust outputs. These principles were established to inform and articulate general expectations for businesses, professionals, and stakeholders across the insurance industry as they implement AI tools to facilitate operations.

Developed by the NAIC’s AI Working Group, the principles are based on the Organization for Economic Co-operation and Development’s (OECD) AI principles which have been adopted by 42 countries, including the United States.

The NAIC’s AI principles outline five key tenets, summarized with the acronym, FACTS:

• Fair and Ethical: respecting the rule of law and implementing trustworthy solutions.
• Accountable: responsibility for the creation, implementation and impacts of any AI system.
• Compliant: have knowledge and resources in place to comply with all applicable insurance laws and regulations.
• Transparent: commitment to responsible disclosures regarding AI systems to relevant stakeholders as well as ability to inquire about and review AI driven insurance decisions.
• Secure/Safe/Robust: ensure reasonable level of traceability of datasets, processes and decisions made and implementation of a systematic risk management process to detect and correct risks associated with privacy, digital security, and unfair discrimination.

In drafting the principles, the working group studied the development of artificial intelligence, its use in the insurance sector, and its impact on consumer protection and privacy, marketplace dynamics, and the state-based insurance regulatory framework. The group also solicited comments from key stakeholders.  As part of the “fair and ethical” tenet, NAIC members added a principle encouraging industry participants to take proactive steps to avoid proxy discrimination against protected classes when using AI platforms.

“The vast amounts of data and ever expanding computing power is accelerating the use of artificial intelligence within the insurance industry. And while this tool can greatly aid businesses across the sector, it also raises new challenges to be addressed, including consumer privacy and safeguards to protect against unintended discrimination that may be built into algorithms,” commented Jon Godfread, North Dakota Insurance Commissioner and Chair of NAIC’s AI Working Group. “These principles are aspirational guideposts for the industry to ensure the technology is used effectively and responsibly—to help insurance organizations and professionals continue to innovate while protecting the consumer.”