On July 11, NYDFS
issued Insurance Circular No. 7 to address the use of AI systems and External Consumer Data and Information Sources (ECDIS) in the underwriting and pricing of insurance policies in New York State. NYDFS outlined its expectations for insurers regarding the responsible and compliant use of the technologies, emphasizing the need to abide by existing laws and regulations that prohibit unfair discrimination.
Key points in the circular included:
- Definitions of AI systems and ECDIS, and insurers will be expected to understand that “traditional underwriting” does not include the use of these technologies.
- Insurers must conduct proxy assessments to ensure ECDIS will not result in discrimination based on protected classes. The circular also clarified what the proxy assessment may entail.
- NYDFS expected insurers to maintain robust governance and risk management practices, including board and senior management oversight, policies and procedures, and risk management frameworks.
- Insurers will be responsible for the oversight of third-party vendors providing AI systems and ECDIS, ensuring compliance with laws and regulations.
- NYDFS will not guarantee the confidentiality of submitted information, as it must comply with disclosure laws.
- The circular emphasized transparency, requiring insurers to disclose the use of AI systems and ECDIS in underwriting and pricing decisions, and to provide reasons for any adverse decisions to consumers.
- Insurers must keep up-to-date documentation and be prepared for NYDFS audits and reviews regarding the use of these technologies.
