AI governance for California carriers
California does not follow the NAIC AI model bulletin. Commissioner Ricardo Lara issued Bulletin 2022-5 on June 30, 2022, reminding every carrier and licensee that artificial intelligence and Big Data may not produce conscious or unconscious bias when marketing, rating, underwriting, processing claims, or investigating suspected fraud. The bulletin does not create a new filing program. It reads existing anti-discrimination and unfair-practices law onto AI and algorithmic tools, and warns that inputs lacking a sufficient actuarial nexus to the risk of loss can be unfairly discriminatory. It reaches every line of insurance affecting California residents.
What California requires
Bulletin 2022-5 is a compliance and enforcement reminder, so it is built around existing California law rather than the NAIC's AIS-Program structure. Carriers and licensees must do their own due diligence before deploying any AI or Big Data tool and be ready to defend it under the laws already on the books.
Due diligence before deployment
Before using any data collection method, fraud algorithm, rating or underwriting tool, or marketing model, conduct your own due diligence to confirm full compliance with all applicable laws. The burden sits with the carrier, not the vendor.
Actuarial nexus and no proxy discrimination
Inputs without a sufficient actuarial nexus to the risk of loss can be unfairly discriminatory. Purportedly neutral factors used as a proxy for a protected class are prohibited, and discrimination against a protected class is barred even where an actuarial nexus exists.
Transparency on adverse decisions
When a complex algorithm drives a declination, limitation, premium increase, or other adverse action, you must give the consumer the specific reason or reasons. A rationale obscured by the technology does not satisfy the obligation.
Examination readiness
The Department reserves the right to audit and examine a carrier's marketing, rating, claims, and underwriting criteria, programs, algorithms, and models, including through market conduct and SIU examinations, and to take disciplinary action.
Legal authority
The bulletin enforces anti-discrimination and unfair-practices law that already binds carriers, applied to AI and Big Data:
- Unruh Civil Rights Act (all persons free and equal)Cal. Civ. Code § 51
- Unfair Insurance Practices Act (unfair discrimination)Cal. Ins. Code § 790.03
- Nondiscrimination in ratemaking and underwritingCal. Ins. Code §§ 679.71, 679.72, 1861.02, 1861.05, 11735
- Fair Claims Settlement Practices Regulations10 CCR § 2695.7
- Disclosure of specific reasons for adverse underwriting decisionsCal. Ins. Code § 791.10
Who it applies to
The bulletin is addressed broadly and reaches these parties:
- All admitted insurance companies
- Non-admitted insurance companies
- Licensees, including agents, brokers, and marketing institutions
- All lines of insurance affecting California residents and businesses
Scope note: Bulletin 2022-5 applies to all admitted and non-admitted insurance companies, licensees, and other interested parties across every line of insurance that touches California residents. There is no carve-out by line of business or company size, so any AI, algorithm, or Big Data tool used in marketing, rating, underwriting, claims, or fraud investigation is in scope.
Compliance timeline
- June 30, 2022Commissioner Ricardo Lara issues Bulletin 2022-5, effective immediately as a reminder of existing legal obligations.
- OngoingCarriers and licensees must conduct due diligence before deploying any AI or Big Data tool and train staff on applicable law.
- OngoingThe Department audits marketing, rating, claims, and underwriting algorithms through market conduct and SIU examinations.
Resources for California carriers
Start with these plain-language explainers and field guides.
What is the NAIC Model Bulletin on AI?
The NAIC Model Bulletin on the Use of AI Systems by Insurers is the template most states use to set AI governance expectations. Here is what it says and why it matters.
GuideWhat is an AIS Program?
An AI Systems Program (AIS Program) is the written program the NAIC Model Bulletin expects every carrier to maintain. Here are its four pillars and what each one requires.
GuideWhat are the NAIC AI Principles?
The NAIC AI Principles, adopted in 2020, are the foundation beneath every state AI bulletin. The five principles spell FACTS: Fair, Accountable, Compliant, Transparent, and Secure.
GuideAI in Insurance: Key Regulatory Definitions
The NAIC Model Bulletin defines the terms that carry legal weight, from AI System to Adverse Consumer Outcome to Model Drift. Here is what each one means for carriers.
ArticleAI Governance for Insurance Carriers: Where AI Runs Across the Value Chain and What Regulators Expect
Insurance AI governance across underwriting, claims, catastrophe modeling, distribution, and cyber: where AI runs today, how its failures reach the loss ratio, and the evidence state regulators now expect carriers to produce.
ArticleReinsurance AI: How Reinsurers and Rating Agencies Are Underwriting Your AI
Reinsurers and rating agencies are already forming a view of the AI in your rating and claims stack. The treaty clauses, rating methodology, case history, and renewal evidence every carrier should understand.
California insurance AI FAQs
Does California follow the NAIC AI model bulletin?
What does Bulletin 2022-5 require?
Which carriers does the bulletin cover?
What is the actuarial nexus requirement?
Is there a filing or attestation deadline?
Sources
- California DOI: Bulletin 2022-5 (full text PDF)
- California DOI: Commissioner Lara press release on bias and discriminatory use of consumer data
- California Insurance Code § 790.03 (Unfair Insurance Practices Act)
- California Civil Code § 51 (Unruh Civil Rights Act)
- Debevoise & Plimpton: California Restricts Insurers' Use of AI and Big Data
Get audit-ready for California's Bulletin 2022-5
Swept AI inventories your models and data inputs, tests them for proxy discrimination and actuarial nexus, and produces the due-diligence record the California Department of Insurance can examine.