The Zelle Lonestar Lowdown
June 18, 2025
One Big Beautiful Bill Act (“OBBA”) which would impose a 10-year freeze on new state-level artificial intelligence regulations and suspend enforcement of existing ones is being challenged by several state insurance commissioners given concerns that the bill’s definition of AI is too expansive.
Specifically, insurance commissioners argue the language in the bill could extend beyond machine learning systems to include common data tools and software regularly used by insurers. If enacted, the provision could potentially limit regulators' ability to monitor and address evolving issues associated with certain emerging technologies that do not fall strictly under the category of AI.
The commissioners also argue that the bill’s moratorium would interfere with recognized oversight practices supporting fairness and transparency in insurance pricing and underwriting to ensure compliance with nondiscrimination standards.
Restricting oversight, the commissioners said, could erode these safeguards at a time when the use of predictive analytics is becoming more prevalent. The inability to adjust regulatory frameworks in response to the growing role of AI in insurance could hinder state-level supervision and consumer protection efforts.
A letter from commissioners also warned that the 10-year freeze might disrupt the state-based insurance regulatory system, which could lead to uncertainty for insurers, delay consumer protection initiatives, and complicate critical business decisions due to the lack of clarity around compliance and enforcement. Ultimately, NAIC leadership urged lawmakers to remove or amend the AI provision in the proposed bill. They also suggested that if the provision moves forward, the Senate should consider exempting the insurance sector.
Additionally, the commissioners stated that, if enacted, the provision is likely to be challenged under the McCarran-Ferguson Act, which prohibits federal laws from overriding state insurance regulations. However, they noted that until a legal ruling is issued, insurers would be left to operate under uncertain conditions, with unclear regulatory expectations and potential exposure to litigation.
OBBBA passed the House of Representatives on May 22, 2025, in a largely party-line vote of 215–214–1.
