Stopping federal moratorium empowers states to continue robust, tailored AI oversight
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COMMENTARY | The 10-year block on state laws regulating the technology would have created uncertainty, something that would have weakened the insurance market and delayed consumer protections.
The rapid evolution of artificial intelligence brings innovative opportunities to the insurance industry. However, it also creates challenges and uncertainties that state insurance regulators diligently address.
Consumer concerns regarding privacy, fairness and transparency as AI use increases are valid. State insurance regulators are taking action to hold companies accountable for how they use AI, enforcing applicable laws and issuing clear guidelines to protect consumers.
These efforts reflect a broader commitment to preserving the foundational principles of insurance regulation in the U.S.
This year marks the 80th anniversary of the McCarran-Ferguson Act. In 1945, Congress passed the landmark legislation, which reaffirmed states' pivotal role in insurance regulation and allowed provisions to address the unique needs of each state's residents.
Yet, as we commemorate this milestone in state-based insurance regulation, a new federal proposal threatens to undermine the very spirit of McCarran-Ferguson in the rapidly evolving area of AI.
The House of Representatives initially passed a version of the budget reconciliation package, known as the “One Big Beautiful Bill Act,” which contained an AI moratorium that blocked state legislative and regulatory actions on AI systems.
While this federal AI moratorium did not specifically target the business of insurance, it would have sidelined state authority in exactly the kind of emerging risk space where state regulators are already actively engaged, and worse still, replaced it with nothing — leaving consumers completely unprotected from harm or unintended consequence as AI rapidly reshapes all aspects of the economy and society.
The moratorium would have overridden state authority for the next decade, stunting the insurance market’s strength during a critical and transformative time in AI’s development and implementation.
To defend state authority, the National Association of Insurance Commissioners added state insurance regulators’ voices to the mountain of concerns being raised about the moratorium as the U.S. Senate considered the bill.
In June, the NAIC wrote Senate leaders that “federal preemption of state regulatory authority would represent a significant departure from the successful, collaborative model that has served consumers and insurers so well...A federal moratorium would create uncertainty — which could weaken the insurance market by increasing risk and delaying or impeding important business decisions and investments as insurers hedge their risks against an unclear regulatory landscape, potential legal challenges, or inconsistent application of standards — as well as delay needed consumer protections.”
Though the Senate’s version of the legislation first tied the moratorium to state acceptance of federal broadband funding, senators instead voted to remove the provision entirely from the draft the Senate returned to the House, which President Donald Trump ultimately signed into law.
The NAIC’s swift action — including our strong letter to congressional leaders — helped defeat the AI moratorium, safeguard McCarran-Ferguson's legacy, and preserve states’ authority to protect consumers by ensuring the responsible use of emerging technology.
State insurance regulators’ work on AI through the NAIC includes developing regulatory principles; surveying insurers on their use of AI and machine learning; establishing the Innovation, Cybersecurity, and Technology (H) Committee to provide a forum for learning and discussion, coordinate efforts, and make recommendations; and creating a “Model Bulletin on the Use of Artificial Intelligence by Insurance Companies” that 24 states have implemented, with four other jurisdictions taking similar or related actions to protect consumers. The Model Bulletin will help ensure fair and accurate outcomes for consumers.
Eighty years later, the truth remains: State insurance regulators know their local markets best. Regulators must remain free to continue robust and tailored oversight of AI for the benefit and protection of consumers.
Jon Godfread is North Dakota Insurance Commissioner and NAIC President; Scott White is Virginia Insurance Commissioner and NAIC President-Elect; Elizabeth Kelleher Dwyer is Rhode Island Department of Business Regulation Director and NAIC Vice President; and Jon Pike is Utah Insurance Commissioner and NAIC Secretary-Treasurer.