State insurance commissioners are calling on the US Senate to revisit provisions in the proposed reconciliation legislation, the "One Big Beautiful Bill Act," which would impose a 10-year freeze on new state-level artificial intelligence regulations and suspend enforcement of existing ones.
The appeal, outlined in a letter from leaders of the National Association of Insurance Commissioners (NAIC), raises concerns that the bill’s definition of AI is too expansive.
Regulators argue that its scope could encompass a broad range of tools and analytics that are widely used in the insurance sector but are not typically considered artificial intelligence.
According to the letter, the language in the bill may extend beyond machine learning systems to include common data tools and software regularly used by insurers. If enacted, the provision could limit regulators' ability to monitor and address evolving issues associated with emerging technologies that do not fall strictly under the category of AI.
Regulators also noted that the moratorium would interfere with established oversight practices that support fairness and transparency in insurance pricing and underwriting. They emphasized that many departments already have protocols in place to evaluate models and ensure compliance with nondiscrimination standards.
Restricting oversight, the commissioners said, could erode these safeguards at a time when the use of predictive analytics is becoming more prevalent. The inability to adjust regulatory frameworks in response to the growing role of AI in insurance could hinder state-level supervision and consumer protection efforts.
Earlier in 2024, the NAIC designated artificial intelligence as a strategic priority, citing the growing integration of AI and advanced data tools in various insurance functions such as underwriting, pricing, and claims handling.
The association noted that while AI presents opportunities for efficiency, it also introduces challenges around accountability, transparency, and bias that require close regulatory attention.
The letter from commissioners also warned that such a moratorium might disrupt the state-based insurance regulatory system. Regulators said the resulting legal ambiguity could lead to uncertainty for insurers, delay consumer protection initiatives, and complicate critical business decisions due to the lack of clarity around compliance and enforcement.
The American InsurTech Council has separately proposed a framework that would require insurers to file annual attestations confirming that their AI systems comply with state insurance laws.
The framework includes oversight of third-party models and data, aiming to hold insurers accountable for technology used throughout their operations. This effort reflects a broader industry initiative to balance innovation with responsible governance.
Specific risks associated with AI have already been flagged in health insurance. Consumer protection groups have raised concerns about AI-driven decision-making in utilization management, where automated tools determine whether medical services are approved.
Advocates warn that these systems may deny or delay care in ways that are difficult for patients and regulators to understand or appeal, making oversight essential.
The broader context includes ongoing tensions between federal and state insurance regulators. The NAIC has previously criticized federal initiatives, including efforts by the Federal Insurance Office (FIO) to collect market data, arguing that such efforts duplicate state work and risk undermining the state-led regulatory framework that has governed the US insurance market for decades.
Regulators pointed out that over half of US states have already adopted the NAIC’s model bulletin on AI or similar guidelines. Ongoing efforts to develop AI-related model laws with input from industry stakeholders were also cited as evidence of active state-level engagement with the issue.
In the letter, the NAIC leadership urged lawmakers to remove or amend the AI provision in the proposed bill. They also suggested that if the provision moves forward, the Senate should consider exempting the insurance sector.
The commissioners stated that, if enacted, the provision is likely to be challenged under the McCarran-Ferguson Act, which prohibits federal laws from overriding state insurance regulations.
However, they noted that until a legal ruling is issued, insurers would be left to operate under uncertain conditions, with unclear regulatory expectations and potential exposure to litigation.
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