Insurance Industry Rejects Proposed Moratorium on State AI Regulation

A proposed decade-long moratorium on state regulation of artificial intelligence has gained the attention of many, including those within the insurance industry.

The 10-year prohibition of AI regulation is contained within the sweeping tax bill, “One Big Beautiful Bill,” and would preempt laws and regulations already in place in dozens of states.

The National Association of Professional Insurance Agents (PIA) on Tuesday sent a letter “expressing significant concern” to Senate leadership, who submitted a reconciliation budget bill that has already passed through the House of Representatives.

“PIA strongly urges the Senate to eliminate the reconciliation language enforcing a 10-year moratorium on state AI legislation and regulation, or explicitly exempt the insurance industry’s state regulation of AI because the industry is already appropriately regulated by the state,” said the letter, signed by Mike Skiados, CEO of PIA.

PIA referenced a model already adopted by the National Association of Insurance Commissioners (NAIC) that requires insurers to implement AI governance programs in accordance with all existing state and federal laws. Nearly 30 states have adopted the NAIC’s model on the use of AI by insurers.

Earlier this month, NAIC sent a letter to federal lawmakers following the passage of the bill in the House. The commissioners said state regulation has been effective in evolving market conditions.

“This system has not only protected consumers and fostered innovation but has also allowed for the flexibility and experimentation that is essential in a rapidly changing world,” said NAIC leadership in the letter. “By allowing states to develop and implement appropriately tailored regulatory frameworks, the system ensures that oversight is both robust and adaptable.

“State insurance regulators understand that AI is a transformative technology that can be leveraged to benefit insurance policyholders by, among other things, creating new product offerings, improving the efficiency of the insurance business, and transforming the consumer experience.”

Related: State AI Regulation Ban Tucked Into Republican Tax, Fiscal Bill

The language—more specifically the definition of AI within the bill—is also of concern. NAIC called it “overly broad” and questioned whether it not only applies to machine learning, but “existing analytical tools and software that insurers rely on every day, including calculations, simulations, and stochastic forecasts… and a multitude of insurtech provided analytical systems for rate setting, underwriting, and claims processing.”

To that end, the American InsurTech Council (AITC) said it “strongly opposes” the AI state regulation moratorium, which it said would “create a dangerous vacuum in oversight during a period of rapid technological change.”

“Such a ban would undermine the foundational principles of insurance regulation in the United States and jeopardize consumer protections at a time when AI is rapidly transforming the way insurance is developed, priced, marketed, underwritten, and delivered,” said the AITC in a statement.

In May, state attorneys general in 40 states urged Congress to get rid of the moratorium proposal within the bill.

On Monday, the National Council of Insurance Legislators (NCOIL) in a statement said a ban on state regulation would “disrupt the overall markets that [NCOIL] oversee,” and “wrongly curtail” state legislators’ ability to make policy. The group said constituents have “been steadfast in asking for protections against the current unknowns surrounding AI, and they cannot wait 10 years for a state-based policy response.”

Topics InsurTech Legislation Data Driven Artificial Intelligence Market