The New York State Department of Financial Services (NYDFS) issued for public comment guidance for insurers operating in the state regarding their use of artificial intelligence (AI) systems and other predictive technologies.

The proposed circular letter announced by the agency Wednesday outlines the NYDFS’s expectations for how insurers develop and manage technologies like AI to mitigate potential harm to consumers.

“Technological advances that allow for greater efficiency in underwriting and pricing should never come at the expense of consumer protection,” said NYDFS Superintendent Adrienne Harris in a press release. “DFS has a responsibility to ensure that the use of AI in insurance will be conducted in a way that does not replicate or expand existing systemic biases that have historically led to unlawful or unfair discrimination.”

The guidance states the importance insurers utilizing AI “establish a proper governance and risk management framework to mitigate the potential harm to consumers and comply with all relevant legal obligations.” It also applies to the use of external consumer data and information sources (ECDIS).

The NYDFS expects insurers using AI or ECDIS to:

  • Perform comprehensive assessments to ensure they aren’t violating any anti-discrimination laws;
  • Ensure appropriate lines of reporting are in place, including to the board and senior managers regarding risk appetite;
  • Formalize policies and procedures for defined roles, responsibilities, monitoring, and reporting requirements;
  • Manage relevant risks at each stage of the technology’s life cycle; and
  • Retain responsibility for understanding any predictive technologies used by third-party vendors and ensuring their compliance.

The proposal acknowledges the NYDFS’s understanding “there is no one-size-fits-all approach to managing data and decisioning systems.”

Comments on the proposal are due March 17.