NYDFS Circular Letter No. 7

Circular Letter No. 7, issued by the New York State Department of Financial Services (NYDFS) in July 2024, is one of the most specific state-level AI guidance documents for insurers. It applies to insurers using AI systems or external consumer data in underwriting and pricing decisions. The letter requires carriers to demonstrate that these tools do not produce unfairly discriminatory or inaccurate outcomes.

The signature requirement is the proxy test: a carrier must document whether a variable is correlated with a protected class, and if so, whether it is required by a legitimate business need and there is no less-discriminatory alternative. The test must be done on actual data, not assumptions, and records must be maintained for examination.

Because New York is a large market, the letter effectively sets a national standard for carriers that write there. Compliance usually requires legal, actuarial, and data-science coordination. See our guide to NYDFS Circular Letter No. 7 and the proxy test.