Over the weekend, the NAIC’s Third-Occasion Information and Fashions (H) Activity 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 information and mannequin distributors and their services,” together with synthetic intelligence. It’s anticipated the method of creating this regulatory “framework” will probably be a two-year course of. The spring and summer time of 2024 will probably be a reality gathering interval whereas over the autumn the duty power plans to debate common concepts for the framework whereas in the end finalizing a common idea on the November Fall Nationwide Assembly in Denver, Colorado. Drafting is slated to start in 2025. It’s contemplated that the anticipated framework “might require new or modification of adopted mannequin legal guidelines or laws in 2025.”
Particular considerations raised within the proposed work plan embody:
- Licensing information and mannequin distributors like advisory or ranking organizations;
- Certification, SOC reviews,[1] and third-party warranties;
- Mandated contract provisions;
- Prior regulatory overview 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 right now, in its proposed work plan, the duty power is “clear that insurers are in the end accountable for guaranteeing that insurance coverage legal guidelines and laws proceed to be complied with whereas utilizing information and fashions from third-party distributors.”
Locke Lord will proceed to watch developments on the NAIC pertaining to third-party information 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 impartial analysis of the controls of a service supplier.
