• DFS has issued draft guidance that “outlines DFS’s expectations for how insurers develop and manage the integration of external consumer data and information sources (‘ECDIS’), artificial intelligence systems (‘AIS’), and other predictive models to mitigate potential harm to consumers.”
• According to DFS: “The use of external consumer data and information sources (‘ECDIS’) and artificial intelligence systems (‘AIS’) can both benefit insurers and consumers alike by simplifying and expediting insurance underwriting and pricing processes, and potentially result in more accurate underwriting and pricing of insurance. At the same time, ECDIS may reflect systemic biases and its use can reinforce and exacerbate inequality. This raises significant concerns about the potential for unfair adverse effects or discriminatory decision-making.
• Under the draft circular letter, DFS expects licensed insurance carriers to:
o analyze ECDIS and AIS for unfair and unlawful discrimination;
o demonstrate the actuarial validity of ECDIS and AIS;
o maintain a corporate governance framework that provides appropriate oversight of the insurer’s use of ECDIS and AIS; and
o maintain appropriate transparency, risk management, and internal controls.
• Comments are due by March 17, 2024.