NAIC's Enhanced AI Regulation in the Insurance Sector

The National Association of Insurance Commissioners (NAIC) has intensified its regulation efforts concerning artificial intelligence (AI) in the insurance sector. Recent initiatives include the release of an AI Issue Brief, the commencement of a multistate AI Evaluation Tool pilot, and the ongoing implementation of the AI Model Bulletin across numerous states. These measures highlight the critical need for payors to comply with AI governance standards at both state and federal levels.

Approximately 24 states have adopted the NAIC's Model Bulletin, designed to scrutinize AI usage in market conduct reviews. This adoption illustrates that regulators possess the necessary authority and tools to evaluate insurers' AI practices. Initially adopted in 2023, the Model Bulletin underscores that existing insurance regulations are applicable to AI systems and sets expectations for governance, testing, documentation, and external vendor oversight.

The NAIC, through its recently published Issue Brief, emphasizes the significance of state-level oversight of AI in insurance. It warns against federal interventions that might disrupt existing consumer protections and the McCarran-Ferguson Act's state-centric regulatory framework. The NAIC argues that state regulators have already established effective supervisory mechanisms, and federal preemption could undermine these efforts.

A notable advancement is the NAIC's pilot of the AI Evaluation Tool, active in 12 states from January to September 2026, including California, Pennsylvania, and Florida. This tool provides a standardized framework for regulators to assess AI implementations within insurance operations. The pilot assists insurers in demonstrating their AI governance to regulators while equipping regulators with a comprehensive understanding of AI applications within companies.

Despite some industry resistance to the Evaluation Tool, with clarifications requested to ensure it does not impose new regulatory obligations, insurers are advised to proactively implement robust AI governance strategies. Utilizing the NAIC Evaluation Tool for self-assessment and cataloging AI systems, including those managed by third-party vendors, aligns with regulatory expectations and mitigates compliance risks.

The NAIC's ongoing initiatives underscore the significance of AI regulation in the insurance industry. Insurers committed to advancing their AI governance efforts will be better equipped to navigate evolving state regulations and compliance requirements. As AI continues to shape underwriting, pricing, claims, and beyond, staying informed on regulatory developments is essential for insurers striving to meet industry standards.