On Feb. 11, 2025, the Department of Banking and Insurance issued Bulletin No. 25-03 to clarify how artificial intelligence may be used in insurance operations within the state. The message is clear: while innovation is welcome, consumer protection remains paramount.
Key takeaways
The bulletin, which focuses on carrier practices, serves as both a reminder and a directive to all insurers authorized in New Jersey. If you’re using AI systems—from underwriting and pricing, to claims and fraud detection—you must ensure those systems comply with existing laws—especially those addressing unfair trade practices and discrimination.
The DOBI highlights its alignment with the National Association of Insurance Commissioners’ Principles for AI, which emphasizes fairness, accountability, compliance, transparency and robustness.
What’s required: the AIS Program
Insurers now are expected to implement a written AI Systems Program. This program must:
- address risk management, governance and internal controls;
- cover all phases of the AI life cycle (from development to retirement);
- apply to both in-house and third-party AI tools; and
- include procedures for notifying consumers when AI is used in decisions affecting them.
It’s not just about having a program; insurers need documentation showing how their AIS Program reduces the risk of Adverse Consumer Outcomes—unfair, inaccurate or discriminatory decisions.
Oversight and enforcement
The DOBI makes it clear that the use of AI doesn’t shield companies from regulatory scrutiny. Market conduct examinations now will consider how AI systems are developed, tested and maintained. Insurers should be prepared to provide:
- documentation of AI governance and oversight processes;
- details about data sources and quality control;
- risk assessments and audit trails for predictive models; and
- evidence of third-party vendor diligence and contractual compliance.
What this means for agents and brokers
While the bulletin addresses insurers directly, it has ripple effects that agents and brokers need to understand, including the following:
Stronger compliance focus. Expect heightened scrutiny in how carriers justify decisions made using AI. That means more documentation and transparency.
Client communications. You may need to explain AI-driven decisions to clients—like rate increases or claim denials—with more clarity and sensitivity. Transparency is now a regulatory expectation.
Due diligence on carrier partners. Working with insurers that have robust AIS Programs could become a competitive advantage. Brokers may want to ask carriers how they manage AI risks.
Training and awareness. Staff training on AI-related compliance and consumer impact may become part of agency best practices—especially when clients are affected by AI outputs directly.
Final thoughts
Bulletin No. 25-03 doesn’t outlaw AI—but it does raise the bar. Innovation now must be paired with responsibility. For agents and brokers, understanding how your carriers manage AI is becoming just as important as knowing their products.
More information on compliance with this bulletin, PIA Northeast members can access AI in the Garden State: compliance requirements under N.J. Bulletin No. 25-03, which can be found in the PIA QuickSource library.
Bradford J. Lachut, Esq.
Bradford J. Lachut, Esq., joined PIA as government affairs counsel for the Government & Industry Affairs Department in 2012 and then, after a four-month leave, he returned to the association in 2018 as director of government & industry affairs responsible for all legal, government relations and insurance industry liaison programs for the five state associations. Prior to PIA, Brad worked as an attorney for Steven J. Baum PC, in Amherst, and as an associate attorney for the law office of James Morris in Buffalo. He also spent time serving as senior manager of government affairs as the Buffalo Niagara Partnership, a chamber of commerce serving the Buffalo, N.Y., region, his hometown. He received his juris doctorate from Buffalo Law School and his Bachelor of Science degree in Government and Politics from Utica College, Utica, N.Y. Brad is an active Mason and Shriner.
