On January 17, 2024 the New York Department of Financial Services (“NYDFS”) published a Proposed Insurance Circular Letter (“Proposed Circular”) regarding the use of artificial intelligence systems (“AIS”) and external consumer data and information sources (“ECDIS”) in insurance underwriting and pricing. This Proposed Circular does not create or change any legislation, but once finalized, will reflect how NYDFS interprets existing laws and regulations as they relate to AIS and ECDIS and to clarify its expectations of the insurance industry.
Purpose and Background
The Proposed Circular, which applies to all insurers authorized to write insurance in New York State that use ECDIS or AIS, defines AIS as any “machine-based system designed to perform functions normally associated with human intelligence” that are used in connection with insurance underwriting or pricing. It defines ECDIS as data or information used to supplement traditional underwriting or pricing, as a proxy for traditional underwriting or pricing, or to establish “lifestyle indicators” that contribute to underwriting or pricing.[1]
The Proposed Circular acknowledges the potential benefits of AIS and ECDIS…
