Over the weekend, the NAIC’s Third-Occasion Knowledge and Fashions (H) Process Pressure launched for a 30-day remark interval (the remark interval expires Monday Could 6, 2024) a proposed work plan to develop a framework for the regulatory oversight of “third-party knowledge and mannequin distributors and their services,” together with synthetic intelligence. It’s anticipated the method of growing this regulatory “framework” can be a two-year course of. The spring and summer time of 2024 can be a reality gathering interval whereas over the autumn the duty pressure plans to debate basic concepts for the framework whereas in the end finalizing a basic idea on the November Fall Nationwide Assembly in Denver, Colorado. Drafting is slated to start in 2025. It’s contemplated that the anticipated framework “could require new or modification of adopted mannequin legal guidelines or rules in 2025.”
Particular considerations raised within the proposed work plan embrace:
- Licensing knowledge and mannequin distributors like advisory or ranking organizations;
- Certification, SOC stories,[1] and third-party warranties;
- Mandated contract provisions;
- Prior regulatory evaluate of fashions, even prior approval; and
- Variation by line of enterprise and/or particular actions.
The proposed work plan acknowledges that some actions entail better dangers to customers and thus raises questions of proportionality to the potential danger, whereas additionally being aware to not discourage innovation.
Whereas the shape and content material of the anticipated regulatory framework is unsure presently, in its proposed work plan, the duty pressure is “clear that insurers are in the end accountable for making certain that insurance coverage legal guidelines and rules proceed to be complied with whereas utilizing knowledge and fashions from third-party distributors.”
Locke Lord will proceed to observe developments on the NAIC pertaining to third-party knowledge and predictive modeling distributors, together with synthetic intelligence. In case you have any questions, please attain out to the writer or your Locke Lord companion.
[1] Generically talking, an SOC report is an unbiased analysis of the controls of a service supplier.
