Unfair Trade Practices
State insurance laws barring deceptive, coercive, or harmful insurer practices, such as misrepresentation, unfair claim settlement, and now some AI decisions.
Unfair trade practices laws are the foundation of state insurance consumer protection. They prohibit deceptive advertising, unfair claim settlement, twisting, rebating, and other conduct that harms consumers or distorts competition. The NAIC Model Bulletin on AI restates that these same laws apply to AI-supported insurance decisions.
The bulletin does not create a new statute. It tells examiners how to apply existing unfair-trade-practices and unfair-discrimination laws to AI systems. This means a carrier cannot defend an AI-driven denial or rate by saying the model was built by a vendor, was black-box, or was not explicitly addressed in state law.
For carriers, the practical implication is that AI governance must be framed around existing compliance obligations. The better the documentation showing that AI decisions were fair, accurate, and reviewable, the stronger the defense against an unfair-trade-practices charge. See our guide to AI governance in insurance.