November 20, 2025

NAIC regulators to pilot an AI evaluation tool for insurer conduct exams

Image shows the words, "Systems Evaluation."

State insurance regulators are about to receive a new AI evaluation tool to help them better understand how insurance companies are utilizing artificial intelligence.

The Big Data and Artificial Intelligence Working Group, part of the National Association of Insurance Commissioners, proposed the AI Systems Evaluation Tool over the summer. Regulators are not required to use it, but it is another option when performing market conduct exams, said Iowa Insurance Commissioner Doug Ommen.

“We just view that this tool is all part of that process to better understand what it is that companies are doing and what controls are in place,” Ommen said during a Wednesday working group meeting.

The working group will kick off the NAIC 2025 Fall Meeting with a four-hour session Sunday morning, Dec. 7 to go over the AI evaluation tool line by line. The meeting is being held that week in Hollywood, Fla.

Regulators are kicking off a pilot phase to gauge the effectiveness of the tool, Ommen said, and he cautioned against being too rigid on how it is used.

“The states are going to use this tool in the pilot on a mix of financial market conduct exams,” Ommen said. “We’ll be sharing insights and using the tool to the pilot group, what works well, what didn’t work well, where there can be improvements, the need for additional clarity on questions and that sort of feedback.”

Growing use of AI

Insurance companies have steadily expanded their use of artificial intelligence over the past decade, moving from basic automation to more sophisticated applications throughout the insurance value chain. More recently, generative AI and advanced automation have reshaped how insurers engage with customers and manage internal operations.

Through it all, regulators have struggled to establish guardrails to preserve fairness, transparency, and consumer protection.

In December 2023, the NAIC adopted the Model Bulletin on the Use of Algorithms, Predictive Models, and Artificial Intelligence Systems by Insurers.

The bulletin is not a model law or a regulation. It is intended to “guide insurers to employ AI consistent with existing market conduct, corporate governance, and unfair and deceptive trade practice laws,” the law firm Locke Lord explained.

The law firm Eversheds Sutherland published three takeaways from the NAIC AI evaluation tool:

The tool assesses a wide range of potential sources of financial, financial reporting and consumer risks resulting from AI systems, demonstrating a more expansive scope than the primary focus on adverse consumer outcomes in the NAIC’s Model Bulletin on the Use of AI Systems by Insurers.
The tailorable templates, charts, and checklists included in the exhibits to the tool allow for regulator discretion and customization to request and review quantitative and qualitative information about the insurer’s AI inventory, governance and risk management practices.
The tool is intended to be one resource that could increase regulators’ understanding of AI systems utilization and risk assessment across insurance companies when performing market conduct exams, financial analysis and other reviews.