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The emerging and expanding use of artificial intelligence and machine learning by organizations across different industry sectors is driving federal and state regulatory efforts to develop a framework or standards to guide the use of the technologies.
As regulators, insurers and others in the insurance industry seek to develop regulations and guidance on the use of algorithms or artificial intelligence systems, keeping regulators informed on developments will be key to ensure that concerns about consumer protection don’t stifle innovation, experts say.
Communication is “imperative” so that regulators understand what insurers are doing and understand the benefits to everybody, said Stephen Clarke, vice president of government relations for Jersey City, New Jersey-based Verisk Analytics Inc.
“People tend to take a very Orwellian perspective on artificial intelligence and machine learning and think of the worst. A lot of that has to do with a lack of specific knowledge,” he said.
“It’s not just insurance carriers that benefit from deploying these technologies, it’s the policyholder. You can deliver a better customer experience when you’re allowed to use some of these tools,” said Mr. Clarke.
“If we cannot tell our story effectively you perhaps will see more (cautious) legislators and regulators throwing up roadblocks,” he said.
Jon Godfread, insurance commissioner for North Dakota, said that “five to 10 years down the road, artificial intelligence and machine learning will be a natural part of most industries.”
“While we’re on the front end of trying to understand what goes into these algorithms and what the models look like, we’ve also got to be cognizant that the reality is our consumers are going to be demanding these services,” said Mr. Godfread.
Part of the challenge is that technological developments, such as artificial intelligence tools, may not fit into a regulated environment, said Mark Radcliffe, a partner at East Palo Alto, California-based DLA Piper U.S. LLP.
“Insurance companies — and regulators, too — need to demand more transparency from the tools,” said Mr. Radcliffe.
Flexibility will be critical to any legislative or regulatory steps in the artificial intelligence area, experts say.
Natalie Pierce, San Francisco-based co-chair of the robotics artificial intelligence and automation industry practice group at employment law firm Littler Mendelson P.C., said that what follows may be a set of AI standards that keep pace with evolving technologies, similar to the way international and safety organizations have dealt with safety issues around robots and collaborative robots, also known as “cobots.”
“It’s not that we’ve updated our Occupational Safety and Health Administration standards so that we have real regulations that tell employers exactly how to bring these technologies onto the factory floor, into the workspaces and laboratories. It’s just that we have strong and capable private and government organizations working together to create best standards and practices,” said Ms. Pierce.
These standards have resulted in many positive developments such as a reduction in worker injuries and increases in safety practices because “they are agile and flexible enough to change with the changing technologies,” she said.
The regulatory and statutory regime that has been set up for the insurance industry is flexible and gives regulators tools to carry out their prime objectives of consumer protection and financial solvency, according to Mr. Clarke.
“If you look at the protections already built into the rating law where rates must be adequate, but may not be excessive nor unfairly discriminatory, and also the Unfair Claims Settlement Practices Act, there are a lot of protections already there today that work well in any environment,” he said.
But whether it is possible to legislate or even regulate something as fast paced as artificial intelligence technology remains to be seen, experts say.
“What exists today in the rule-making and set of laws in the United States and around the globe just aren’t prepared for the level of change,” said Frank Sorrentino, Englewood Cliffs, New Jersey-based chairman and CEO of ConnectOne Bank.
“We’ve been through this before. There have been other points in history where there’s been this dramatic innovation taking place in the marketplace…We will have to figure this one out too,” said Mr. Sorrentino.
“If you look at the turn of the century, we’ve had these similar jumps in technology before and we’ve been able to figure it out and work through it,” said Mr. Godfread.
“It’s about putting up fence posts and guideposts. When you start to get specific and say you can or cannot use this data set or you can or cannot use this certain piece, the minute you put that on paper it’s out of date,” he said.
“It’s about the spirit of the law and how it’s being applied,” he said.
It will take time for regulatory agencies to build up the talent and knowledge needed to monitor evolving artificial intelligence technologies, observers say.