State Regulators May Hold Insurers Liable for Vendors’ AI Mistakes

With artificial intelligence and big data tools proliferating across the health insurance sector — and lawmakers struggling to keep pace with AI's rapid development — regulators are developing rules and procedures that will govern their approach to insurance AI in the years to come. According to experts, a draft regulatory letter and comments by top state insurance officials indicate that regulators will hold insurers accountable for any AI-driven missteps — which could include exacerbating health disparities, or problems with clinical review and prior authorization — even if the AI tools driving the decision are designed and maintained by third-party vendors. 

The model regulatory letter says that “insurers are expected to adopt practices, including governance frameworks and risk management protocols, that are designed to assure that the use of AI Systems does not result in: 1) unfair trade practices…or 2) unfair claims settlement practices.” The letter was developed by insurance regulators from multiple states collaborating as part of the National Association of Insurance Commissioners (NAIC) and does not carry any legal force unless issued by a given state insurance regulator.