Michigan reminds insurers using AI to comply with law
State regulators highlighted the fact that AI techniques are now deployed across all stages of the insurance life cycle.
The Michigan Department of Insurance and Financial Services (MDIFS) said recently that it intends to protect consumers from insurance carriers that use AI technologies to make policy decisions.
The state’s insurance regulators issued a bulletin on Aug. 7, 2024, reminding all insurers, nonprofit health service plans, HMOs and dental plan organizations that they must comply with applicable insurance laws and regulations when underwriting new policies, making coverage determinations or deciding how much their products will cost.
The MDIFS bulletin also includes laws addressing unfair trade practices and discrimination, reflecting the department’s expectations of how insurers will govern the development, acquisition and use of certain AI technologies.
“AI techniques are deployed across all stages of the insurance life cycle, including product development, marketing, sales and distribution, underwriting and pricing, policy servicing, claim management and fraud detection,” MDIFS Director Anita Fox said in the bulletin.
“AI may facilitate the development of innovative products, improve consumer interface and service, simplify and automate processes, and promote efficiency and accuracy,” she added. “However, AI, including AI Systems, can present unique risks to consumers, including the potential for inaccuracy, unfair discrimination, data vulnerability, and lack of transparency and ‘explainability.’ Insurers should take actions to minimize these risks.”
The MDIFS recognizes the Principles of Artificial Intelligence used by the National Association of Insurance Commissioners (NAIC) as an appropriate source of guidance for insurers as they develop and use AI systems, according to the bulletin, due to the principles’ emphasis on fairness and ethical AI use along with compliance with state laws and regulations, transparency, and a safe robust system.
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