Underwriting and Pricing
Evaluating risk and setting premium rates. AI here is scrutinized for unfair discrimination and proxy effects across life, health, and property-casualty lines.
Underwriting and pricing are the core insurance functions of evaluating risk and setting the premium charged for coverage. AI is used to score risk, triage applications, recommend rates, and identify fraud. Because these decisions directly affect what consumers pay and whether they are covered, they attract the most regulatory attention.
The NAIC Model Bulletin, New York’s Circular Letter No. 7, and Colorado’s AI rules all focus heavily on underwriting and pricing AI. The common concern is unfair discrimination: a model may appear neutral but produce outcomes that vary by race, gender, ethnicity, or other protected characteristics, often through proxy variables like geography or credit data.
Carriers must be able to show the inputs, testing methodology, and results. A vendor-built model does not transfer the compliance obligation away from the insurer. See our analysis of NYDFS Circular Letter No. 7 and AI in health insurance.