Colorado Regulators Approve Life Insurance AI Rules

Now that companies like Google and Microsoft have started making AI systems that can generate text available to consumers for free, users can see the AI systems “hallucinating,” or responding with clearly incorrect answers in response to unclear prompts or lack of access to the kinds of information the systems need to answer users’ questions.

The Regulation

The regulators say their regulation applies to any “external consumer data and information source,” or ECDIS.

ECDIS means “a data or an information source that is used by a life insurer to supplement or supplant traditional underwriting factors or other insurance practices or to establish lifestyle indicators that are used in insurance practices.”

The term includes “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, and any insurance risk scores derived by the insurer or third-party from the above listed or similar data and/or information source,” according to the regulation text.

Insurers are supposed to make sure that the vendors supplying any ECDIS, including AI tech, are in compliance with Colorado antidiscrimination regulations.

An insurer will have to come up with a systematic approach to assessing and managing ECDIS discrimination risk and determining whether external vendors are complying with the regulations.

Reactions

Scott Kosnoff and other AI and insurance regulatory specialists at Faegre Drinker suggested that complying with the new analytical tech regulation will “entail a significant compliance lift for many insurers,” but that the current version may be easier than complying with an initial draft released in February would have been.

Paige Waters and Stephanie O’Neill Macro noted in a summary of the new regulation that the documents life insurers send to the Colorado insurance division to comply with the new regulation will be considered confidential.

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