The business of insurance has been successfully regulated at the state level for over a century, and the McCarran-Ferguson Act of 1945 codified the longstanding exemption of the insurance industry from most federal regulation. The local expertise of state insurance regulators has proven beneficial for consumers, insurers, and the industry at large, thanks to their ability to quickly respond to emerging insurance risks associated with changing technologies, including artificial intelligence (AI). 

In fact, state insurance regulators are already at the forefront of AI regulation. The National Association of Insurance Commissioners (NAIC) adopted a Model Bulletin in 2023 that requires insurers to implement AI governance programs in accordance with all existing state and federal laws. It also offers a template by which insurance commissioners can communicate their expectations to their domiciliary carriers. As of May 2025, nearly 30 states had already adopted the NAIC’s model bulletin on the use of artificial intelligence systems by insurers

State regulators also object to the unnecessarily expansive definition of AI included in the legislative text, noting that its “language … would potentially apply not only to advanced machine learning systems, but also to a wide range of processes using existing analytical tools and software that insurers rely on every day, including calculations, simulations, and stochastic forecasts performed in millions if not hundreds of millions of Excel spreadsheets, databases, coded scripts, and a multitude of InsurTech provided analytical systems for rate setting, underwriting, and claims processing.”[1] This overly broad definition could prevent state legislators and regulators from conducting appropriate oversight of insurers, whether the risk is related to AI or not. It would also increase costs and regulatory uncertainty for the targeted entities and states and potentially delay the implementation of needed consumer protections.

PIA strongly urges the Senate to eliminate the reconciliation language enforcing a 10-year moratorium on state AI legislation and regulation, or explicitly exempt the insurance industry’s state regulation of AI because the industry is already appropriately regulated by the states.