Jurisdiction: United States

Join Us for the First in Our Series on AI

Increased use and influence of artificial intelligence systems by companies and consumers bring with them new and dynamic oversight, compliance, governance and disclosure challenges. Legal and risk management professionals must develop processes and policies for AI tools that work within the requirements of the law as it is today, while also anticipating the coming wave of legal, regulatory and technological changes. Over the next few months, Locke Lord lawyers will tackle some of the most pressing AI concerns in a series of complimentary webinars discussing practical, real-world challenges facing organizations.

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Artificial Intelligence Regulation in the ‎Insurance Industry – 2023 a Year in Review‎

2023 has been a very productive year for regulators advancing their efforts to understand new technologies and consider whether and how to regulate the rapidly developing technologies, including artificial intelligence, predictive models and algorithms. Keeping in mind that existing insurance laws and regulations often are broad enough to sweep in the new technologies, both the industry and regulators desire a better understanding of how the technologies are being used and how to approach their regulation. In 2023, many initiatives took root and spurred further efforts to protect consumers in the wake of new technological innovations impacting the insurance industry.

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Tenth Circuit Denies En Banc Hearing in PBM Case, Will the Supreme Court Hear the ‎Case?‎

On December 12, the United States Court of Appeals for the Tenth Circuit (“Tenth Circuit”) denied en banc hearing to the Attorney General of the State of Oklahoma in Pharmacy Care Management Association v. Mulready. The Oklahoma Attorney General’s office is likely to appeal to the Supreme Court. Arguably, there may now be a circuit split as the Eighth Circuit had previously ruled that ERISA did not preempt regulation of pharmacy benefit managers (“PBMs”) by the North Dakota Insurance Department while the Tenth Circuit ruled that similar regulation is preempted by ERISA.

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NAIC H Committee Pre-Fall National Meeting

This coming Friday the Big Data & Artificial Intelligence (H) Working Group, the Privacy ‎Protections (H) Working Group, and the Innovation, Cybersecurity, and Technology (H) ‎Committee will all meet as part of the Fall National Meeting of the National Association of ‎Insurance Commissioners (“NAIC”) in Orlando, Florida. Data use, data retention, and artificial ‎intelligence (“AI”) will be the big topics at the Fall National Meeting. Other H Committee ‎affiliated working groups will not be meeting at the Fall National Meeting; however, those ‎working groups met earlier over the fall and are moving their workstreams forward.‎

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Colorado Proposes Guidance Bulletins for Life Algorithms & Predictive ‎Models Regulation

On November 20, 2023, the Division of Insurance of the Colorado Department of Regulatory Agencies (“DORA”), published for a 9 day public comment period two proposed bulletins which would provide clarifying guidance on the implementation of Colorado Insurance Regulation 10-1-1: Governance of Risk Management Framework Requirements for Life Insurer’s Use of External Consumer Data and Information Sources, Algorithms, and Predictive Models, which was adopted in September 2023 pursuant to SB21-169.

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NAIC Approaching the Finish Line on Health Insurance Lead Generators

The Antifraud (D) Task Force of the National Association of Insurance Commissioners ‎‎(“NAIC”) met on October 20, 2023, to discuss comments received on the August 20 draft ‎revisions to the Model Unfair Trade Practices Act (#880) which would expand the regulatory ‎reach of state insurance regulators to health insurance lead generators, which are not registered ‎or licensed by state insurance regulators. The October 20 meeting became a drafting session as ‎member regulators negotiated textual revisions in real time. Draft new language was uploaded ‎to the NAIC website the evening of Thursday, October 26, 2023, for a one-week comment ‎period closing on Friday November 3, 2023. Despite potential procedural hurdles around public ‎comment periods and open-meeting requirements, the expectation remains that final revisions ‎will be adopted at the Fall National Meeting.‎

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NAIC E Committee Expands Guaranty Fund Coverage for IBT and CD ‎Transactions

On October 25, 2023, the Financial Condition (E) Committee (the “E Committee”) of the National Association of Insurance Commissioners (“NAIC”) adopted revisions to the Property and Casualty Insurance Guaranty Association Model Act (#540) which would ensure guaranty fund coverage following insurance business transfer or corporate division transactions. The adopted draft is coverage neutral in that if there was guaranty fund coverage before the transaction the coverage would remain, but if there was not guaranty fund coverage before the transaction coverage would not result from the transaction. The adopted draft includes optional language that would provide coverage for assumed claims transactions.

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Connecticut Expands Notice Requirements for Withdrawing From a Line of ‎Business

Property and casualty insurance companies’ decisions to withdraw from certain lines of ‎business, in jurisdictions such as California and Florida, has garnered a great deal of attention in ‎recent months. The Connecticut Department of Insurance (the “Department”) recently ‎published a bulletin clarifying its expectations for prior notice from property & casualty carriers ‎when planning to exit a line of business or discontinue a subline of business. The new bulletin ‎rescinds and replaces a prior bulletin,‎ extending the bulletin’s reach regarding location-based ‎discrimination and “agency-facing applications and other technology, processes (e.g., referrals ‎to underwriters) or communications to producers.”‎

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