NYDFS Insurance Circular Letter No. 7 (2024) — Use of AI Systems and External Consumer Data in Insurance Underwriting and Pricing

New York's Department of Financial Services issued Insurance Circular Letter No. 7 on July 11, 2024, establishing the most substantive state insurance AI rule in the country. Going beyond the NAIC Model Bulletin adopted by 24+ states, NYDFS CL No. 7 requires insurers to conduct a comprehensive 'proxy assessment' before using any AI system (AIS) or external consumer data source (ECDIS) in underwriting or pricing — and prohibits any such use unless the insurer can demonstrate the system does not produce unfair or unlawful discrimination against protected classes. When an AI-influenced adverse underwriting decision is made, the insurer must provide written notice within 15 days of the decision. Governance, documentation, and DFS market-conduct examination requirements apply immediately.

Technical detail

NYDFS Insurance Circular Letter No. 7 (2024), issued July 11, 2024. Scope: all insurers licensed in New York across all lines (life, health, P&C, title). Applies to insurer use of Artificial Intelligence Systems (AIS) and External Consumer Data and Information Sources (ECDIS) in underwriting and pricing decisions. Key requirements: (1) Proxy Assessment — insurer may not use ECDIS/AIS in underwriting or pricing unless it completes a comprehensive assessment demonstrating the use does not produce an unfair or unlawful discriminatory effect based on protected class attributes, including proxy discrimination; (2) Adverse Action Notice — if an AIS or ECDIS contributes to an adverse underwriting decision, insurer must provide written notice to applicant within 15 days, including the specific ECDIS used and reasons for the decision; (3) Governance and Documentation — insurers must maintain records of their testing methodology and proxy-assessment results, commensurate with complexity and materiality of use; records available to DFS on request; (4) DFS Market Conduct — DFS may examine insurer AI practices under existing market-conduct authority. Does not require new legislation (issued under existing Insurance Law unfair discrimination provisions). Issued January 17, 2024 as proposed guidance; finalized July 11, 2024. Distinct from the NAIC Model Bulletin adopted by 25+ states: NYDFS CL No. 7 adds the proxy-discrimination assessment prohibition and mandatory adverse-action notice not present in the NAIC bulletin.

Who is protected: New York insurance applicants, policyholders, and claimants subject to AI-assisted underwriting or pricing decisions — particularly those in protected classes who may be harmed by proxy discrimination

Who must comply: All insurers licensed to write any line of insurance business in New York (life, health, property/casualty, title, and reinsurance) that use AIS or ECDIS in underwriting or pricing

Key facts

More AI rules in New York

• NY Hochul EO — Statewide Data Center Moratorium (2026) · In effect
• NY Responsible Data Center Development Act (passed, awaiting Governor) · Proposed / pending
• New York Deepfake Harassment and NCII Civil Action Act · Proposed / pending
• New York Deepfake Harassment and NCII Civil Action Act (Assembly) · Proposed / pending
• NY AI Professional Impersonation Liability Bill · Proposed / pending
• NY AV testing pilot · In effect

Related insurance AI rules elsewhere

• Georgia SB 544 (health insurer AI) · Enacted (not yet in effect)
• Indiana HB 1271 (AI claims downcoding) · In effect
• Utah SB 319 (health insurer AI) · Enacted (not yet in effect)
• NAIC AI Evaluation Tool Pilot (12 states, 2026) · Proposed / pending
• AZ HB 2175 (AI Insurance Denial — Physician Review) · In effect
• TX TDI Bulletin B-0003-26 (AI in insurance) · In effect