Regulon.AI — IL-SB-1425 · IL SB 1425 (AI Use in Health Insurance)

Summary

Establishes regulatory oversight by the Illinois Department of Insurance over insurers' use of AI systems and predictive models in making or supporting adverse consumer determinations. Prohibits insurers from issuing adverse consumer outcomes (denial, reduction, or termination of insurance plans or benefits) that result solely from AI systems or predictive models. Requires meaningful human review with override authority for all AI-assisted decisions concerning denial, reduction, or termination of insurance plans or benefits. Authorizes the Department to adopt rules, including emergency rules, for disclosure standards and implementation. The Act applies to all insurers authorized to do business in Illinois.

Enforcement & Penalties

Enforcement Authority

Illinois Department of Insurance. Enforcement is agency-initiated through investigation or market conduct action. The Department has regulatory oversight authority over insurers' use of AI systems to make or support adverse determinations affecting consumers, and may request information and documentation from insurers. The Department may adopt rules, including emergency rules, to implement and administer the Act. No private right of action is created by the statute.

Penalties

The Act does not specify monetary penalties, damages, or specific remedies. Enforcement is through the Department of Insurance's existing regulatory authority over insurers, including investigation and market conduct actions. Remedies would be determined under the Department's general enforcement powers and any rules adopted pursuant to the Act.

Who Is Covered

Compliance Obligations 4 obligations · click obligation ID to open requirement page

R-02 Regulatory Disclosure & Submissions · R-02.2 · Deployer · HealthcareFinancial Services

Section 10(a)

Plain Language

The Department of Insurance has broad authority to investigate and request documentation from any insurer authorized to operate in Illinois regarding its development, implementation, and use of AI systems and predictive models. Insurers must comply with such requests. The scope of inquiry is expansive: the Department may ask about specific models or AI systems, AI governance and risk management protocols, due diligence on third-party AI vendors, and compliance with the insurer's own AI systems program. This effectively requires insurers to maintain documentation in a form that can be produced upon request, covering the full lifecycle of AI systems used in insurance decision-making.

Statutory Text

(a) The Department's regulatory oversight of insurers includes oversight of an insurer's use of AI systems to make or support adverse determinations that affect consumers. Any insurer authorized to operate in the State is subject to review by the Department in an investigation or market conduct action regarding the development, implementation, and use of AI systems or predictive models and the outcomes from the use of those AI systems or predictive models. The Department may also request other information or documentation relevant to an investigation or market conduct action, and an insurer must comply with that request. The Department's inquiries may include, but are not limited to, questions regarding any specific model, AI system, or application of a model or AI system. The Department may also make requests for information and documentation relating to AI systems governance, risk management, and use protocols; information and documentation relating to the insurer's preacquisition and preutilization diligence, monitoring, and auditing of data or AI systems developed by a third party; and information and documentation relating to implementation and compliance with the insurer's AI systems program.

HC-01 Healthcare AI Decision Restrictions · HC-01.1 · Deployer · HealthcareFinancial Services

Section 10(b)

Plain Language

Insurers may not deny, reduce, or terminate insurance plans or benefits based solely on AI system or predictive model outputs. Every decision-making process involving AI that results in such adverse actions must be meaningfully reviewed by a human individual who has the authority to override the AI system's determination. The review procedures will be further specified by Department rules. This is a dual obligation: (1) an outright prohibition on fully automated adverse decisions, and (2) a requirement for meaningful human review with override authority on any AI-assisted adverse decision. Note that the definition of adverse consumer outcome is broad — it encompasses both decisions that violate regulatory standards and any claim denial determined by an AI system.

Statutory Text

(b) An insurer authorized to do business in this State shall not issue an adverse consumer outcome with regard to the denial, reduction, or termination of insurance plans or benefits that result solely from the use or application of any AI system or predictive model. Any decision-making process concerning the denial, reduction, or termination of insurance plans or benefits that results from the use of AI systems or predictive models shall be meaningfully reviewed, in accordance with review procedures established by Department rules, by an individual with authority to override the AI systems and their determinations.

HC-01 Healthcare AI Decision Restrictions · HC-01.7 · Deployer · HealthcareFinancial Services

Section 15

Plain Language

The Department of Insurance is authorized to adopt rules establishing standards for how insurers must disclose their use of AI systems — including the manner, content, and specific required disclosures. While this section is permissive rather than mandatory (the Department 'may' adopt such rules), once rules are adopted, insurers will be required to comply with whatever disclosure standards are established. Insurers should anticipate potential disclosure requirements and begin preparing compliance infrastructure for AI use transparency in insurance decision-making.

Statutory Text

The Department of Insurance may adopt rules that include standards for the full and fair disclosure of an insurer's use of AI systems that set forth the manner, content, and required disclosures.

Other · HealthcareFinancial Services

Section 20

Plain Language

This provision confirms that the Act's scope extends to all consumer-impacting decisions made or supported by AI or machine learning, and reaffirms that all existing insurance laws — including unfair trade practices and anti-discrimination statutes — continue to apply when insurers use AI systems. It creates no new obligation beyond what is already imposed by existing law and the Act's other provisions; it is a compliance pass-through ensuring that AI use does not create a regulatory gap.

Statutory Text

All insurers authorized to do business in Illinois shall comply with this Act regarding any decisions impacting consumers that are made or supported by advanced analytical and computational technologies, including AI systems and machine learning, and must comply with all applicable insurance laws and regulations, including laws addressing unfair trade practices and unfair discrimination. All decisions made and actions taken by authorized insurers using AI systems must comply with applicable federal and State laws, regulations, and rules.