During the Fall Meeting, the Big Data and Artificial Intelligence (H) Working Group, chaired by Commissioner Elizabeth Kelleher Dwyer, tackled several issues in the insurance industry about the use of artificial intelligence and machine learning (AI/ML).
After the minutes from the 2023 NAIC Fall Meeting were adopted, Commissioner Kevin Gaffney of Vermont presented the results of the Life AI/ML survey, which is the final installment of the 3-part survey, with the previous two being Personal Auto (12/2202) and Home Insurance (8/2023). The third survey, similar to the first two, was conducted with three goals:
- gain a better understanding of the insurance industry’s use and governance of AI
- aid in the development of guidance and regulatory frameworks on the use of AI/ML
- inform regulators of the current and future business practices around AI/ML
Of the 161 companies surveyed, 94 (58%) are using or plan on using AI/ML in the business life insurance arena. This is significantly lower than the 70% for home insurers and 88% for auto insurers. Reasons for the lower adoption rate included a lack of a business reason, not enough resources, and the over-reliance on legacy systems.
When diving deeper, Mr. Gaffney reported that of those life insurance companies who have adopted (or are planning to adopt) the use of AI/ML, 36% focused on marketing, 34% on underwriting, 18% on pricing, and only 11% for risk management. Mr. Gaffney concluded that although the NAIC has built a foundational knowledge base around the use of AI in the industry. The next step for the NAIC is to apply this knowledge to application and practical use.
Commissioners Gaffney and Dwyer offered a tie-in between the life, auto and home surveys and the Model Bulletin on the Use of Artificial Intelligence Systems by Insurers, which was also adopted during the 2023 Fall National Meeting. The model bulletin, according to the NAIC site, “reminds insurance carriers that decisions impacting consumers that are made or supported by advanced analytical and computational technologies, including AI, must comply with all applicable insurance laws and regulations, including unfair trade practices.”
To sum up the session, Mr. Gaffney offered the following as part of his concluding remarks, “Life surveys and all the other surveys [are] not just for life looking at the product level…but trying to map them to the components of the AI bulletins.”