RELATING TO INSURANCE.

SB2953

THE SENATE

S.B. NO.

2953

THIRTY-THIRD LEGISLATURE, 2026

STATE OF HAWAII

A BILL FOR AN ACT

Relating
to INSURANCE
.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:

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SECTION 1.
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The legislature finds that artificial
intelligence and advanced analytics systems are increasingly used across the
insurance lifecycle, including underwriting, pricing, policy servicing, and
claims handling, and may improve efficiency and accuracy.
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However, these systems can also create risks
of error, unfair discrimination, lack of transparency, and adverse consumer
outcomes when relied upon without appropriate human accountability and
governance controls.

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The
legislature further finds that health insurance, unlike many other lines of
insurance, operates as a managed care platform that directly affects access to
clinical services and treatment outcomes, and therefore requires heightened
guardrails when artificial intelligence systems are used to support medical
necessity determinations and utilization management decisions.
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Stakeholders have raised concerns that adverse
coverage determinations may be made or supported by artificial intelligence in
ways that are not meaningfully reviewable by providers or patients, and that
guardrails should exist at the point of initial denial, rather than only during
appeals.
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Therefore, the legislature
finds that denials of health insurance coverage tied to medical necessity
should be subject to review by appropriately qualified, licensed clinicians.

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The
legislature also finds that property insurers increasingly use aerial images,
including images analyzed by machine learning and similar tools, to support
underwriting decisions, including nonrenewals, and that consumers may be
unaware of the images used or may be unable to rebut errors or remedy
identified conditions.
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National
legislative work has emphasized reasonable standards requiring the provision of
date‑stamped images, clear notice, and a meaningful opportunity to cure
or rebut the identified issue before nonrenewal when aerial imagery is used as
the sole basis for an adverse action.
�

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Accordingly,
the purpose of this Act is to:

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(1)
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Establish a tool-neutral governance and
accountability framework for insurers' use of artificial intelligence systems
that is consistent with widely adopted regulatory expectations emphasizing
transparency, fairness, accountability, and compliance with existing unfair
trade practices and unfair discrimination standards;

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(2)
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Require licensed clinician review for
specified adverse determinations when artificial intelligence systems are used
to make or support medical necessity decisions; and

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(3)
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Establish consumer protections against
the use of aerial images and artificial intelligence systems as the sole basis
for specific adverse underwriting actions in residential property insurance,
including rebuttal and cure procedures; disclosure, image access, and
renewal-after-cure requirements; and limits on cross-insurer sharing of
imagery-derived data.

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SECTION
2.
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Chapter 431, Hawaii Revised Statutes,
is amended by adding a new part to article 13 to be appropriately designated
and to read as follows:

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Part
.
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ARTIFICIAL intelligence systems
in insurance

A.
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General
Provisions

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431:13-A
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Definitions.
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As used in this part:

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"Artificial
intelligence system" means a machine-based system that, for a given set of
objectives, generates outputs such as predictions, recommendations, content,
classifications, scores, or similar outputs that influence decisions in real or
virtual environments, and that operates with varying levels of autonomy.

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"Artificial
intelligence system governance program" or "program" means the
written governance, risk management, and internal control program required
pursuant to section 431:13-D.

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"Commissioner"
means the insurance commissioner of the State.

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"Consumer"
means an applicant, policyholder, insured individual, covered person, claimant,
beneficiary, or other natural person who is the subject of an insurance
practice.

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"Insurance
practice" means underwriting, rating, marketing, sales, policy
administration, utilization management, claims handling, fraud detection, or
any other practice in the business of insurance that may impact consumers, as
determined by the commissioner by rule.

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"Insurer"
has the same meaning as defined in section 431:1‑202.
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"Insurer" includes any person or
entity subject to the jurisdiction of the commissioner under this chapter, to
the extent that the person or entity uses an artificial intelligence system in
an insurance practice that may impact consumers.

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"Vendor"
means a third party that provides, develops, licenses, procures, maintains, or
materially modifies an artificial intelligence system used by an insurer in an
insurance practice.

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431:13-B
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Violations; enforcement; no private right of
action.
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(a)
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Any violation of this part shall constitute
an unfair method of competition or unfair or deceptive trade act or practice in
the business of insurance in violation of section 431:13-102.

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(b)
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This part shall be enforced exclusively by
the commissioner.
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Nothing in this part
shall be construed to create or imply a private right of action.
�

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431:13-C
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Rules.
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The commissioner shall adopt rules pursuant to chapter 91 to
implement this part, including rules establishing:

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(1)
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Additional definitions and
clarifications of scope;

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(2)
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Standards for recordkeeping,
documentation, notices, and disclosures;

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(3)
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Minimum testing, monitoring, and
auditing expectations for artificial intelligence systems proportionate to
consumer risk; and

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(4)
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Procedures for the submission and
protection of confidential and proprietary information.

B.
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Artificial
Intelligence Governance Requirements Applicable To All Insurers

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431:13-D
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Artificial intelligence system governance
program.
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(a)
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Any insurer using an artificial intelligence
system in any insurance practice that may impact consumers shall develop,
implement, and maintain an artificial intelligence system governance program
pursuant to the requirements of this section.

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(b)
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An artificial intelligence system governance
program shall be risk-based and proportionate to the nature of the decisions
supported by the artificial intelligence system and the degree of potential
harm to consumers.
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The program shall
include:

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(1)
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Board or senior management
accountability for artificial intelligence system strategy, oversight, and
compliance;

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(2)
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Documented policies and procedures addressing
procurement, development, use, monitoring, and retirement of artificial
intelligence systems;

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(3)
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Data governance controls, including
data quality, relevance, limitations, and documented data lineage to the extent
practicable;

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(4)
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Model validation and testing protocols,
including processes to identify material errors, bias, and model drift;

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(5)
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Controls addressing risks relating to third-party
artificial intelligence systems and vendors, including contractual requirements
for cooperation with regulatory inquiries and audits; and

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(6)
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Recordkeeping requirements sufficient
to demonstrate compliance with this part.

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(c)
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Nothing in this section shall be construed to
require public disclosure of proprietary source code or trade secrets; provided
that an insurer shall maintain sufficient documentation to demonstrate
compliance with the requirements of this subpart to the commissioner upon
request.

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431:13-E
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Testing; monitoring; auditing.
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(a)
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An
insurer shall conduct and document pre-deployment testing and continuous
monitoring for each artificial intelligence system used in an insurance
practice that may impact consumers.

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(b)
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Testing and monitoring conducted pursuant to
this section shall be reasonably designed to detect:

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(1)
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Material errors or performance
degradation;

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(2)
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Unfair discrimination or disparate
consumer impacts inconsistent with applicable law;

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(3)
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Model drift and data shifts; and

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(4)
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Cybersecurity and data integrity risks
that materially affect the reliability of outputs.

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(c)
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The commissioner may adopt rules pursuant to
section 431:13-C to establish minimum testing requirements and audit elements
for classes of artificial intelligence system use cases based on consumer risk.

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431:13-F
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Submission of records; examination;
confidentiality.
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(a)
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Upon request of the commissioner, an insurer
shall provide its records of any artificial intelligence system used in an
insurance practice that may impact consumers, including documentation regarding
governance, validation, testing, monitoring, auditing, and vendor arrangements.

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(b)
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Any records and information submitted to the
commissioner pursuant to this section that is a trade secret or confidential
commercial or financial information shall be treated as confidential to the
extent permitted by law.

C.
�
Artificial
Intelligence Systems In Health Insurance

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431:13-G
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Definitions.
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As used in this subpart:

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"Adverse
determination" has the same meaning as defined in section 432E-1.

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"Health
benefit" means those health care services to which a consumer is entitled
under the terms of a health benefit plan.

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"Health
benefit plan" has the same meaning as defined in section 431:26-101.
�

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"Health
care services" has the same meaning as defined in section 431:26-101.

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"Health
insurer" means any insurer, nonprofit health service plan, mutual benefit
society, health maintenance organization, or other entity authorized to issue,
deliver, or renew a health benefit plan in the State, as determined by the
commissioner by rule.

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"Medical
necessity determination" means a decision regarding whether a health care
service, treatment, procedure, medication, device, or setting is medically
necessary or otherwise covered under the terms of a health benefit plan.

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431:13-H
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Adverse medical necessity determinations; licensed
clinician review requirements.
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(a)
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No health insurer shall use
an artificial intelligence system as the sole basis for making an adverse
determination for a medical necessity determination.

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(b)
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Whenever an artificial intelligence system is
used to make or support a medical necessity determination that results in an
adverse determination, the health insurer shall verify the final adverse
determination; provided that verification shall require that the adverse
determination is reviewed and affirmed by:

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(1)
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A physician or other appropriately
licensed health care professional authorized to make the relevant clinical
determination within the scope of the professional's license; and

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(2)
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A reviewer with training and experience
in the same or similar specialty that typically manages the condition, service,
or treatment at issue, as determined by the commissioner by rule.

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(c)
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Each health insurer shall maintain
documentation sufficient to demonstrate its compliance with this section,
including the identity and credentials of the reviewing clinicians and the
basis for each determination; provided that the documentation may be protected
as confidential when submitted to the commissioner pursuant to section 431:13-F.
�

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431:13-I
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Transparency to providers and consumers;
notice requirement.
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(a)
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Whenever an artificial intelligence system is
used to make or support an adverse determination, the health insurer shall
provide to the consumer and, when applicable, the requesting provider, the
following:

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(1)
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Notice of the use of an artificial
intelligence system;

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(2)
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A description of the primary factors
that materially contributed to the adverse determination; and

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(3)
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Clear instructions describing how to
submit additional clinical information, seek reconsideration, or pursue any
available internal or external appeal rights;

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provided
that the disclosures shall be made in plain language and in the manner
prescribed by the commissioner by rule.

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(b)
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The notice required pursuant to subsection
(a) shall not require disclosure of proprietary source code or trade secrets;
provided that the notice shall be sufficient for a reasonable person to
understand the basis for the adverse determination and how to contest or
supplement the record.

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431:13-J
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Health insurance oversight metrics;
requirements.
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(a)
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Any health insurer that uses an artificial
intelligence system to make or support medical necessity determinations, prior
authorization decisions, or other utilization management decisions shall
conduct and document continuous monitoring of the artificial intelligence
system.
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The monitoring shall include:

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(1)
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Pre-deployment testing; and

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(2)
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Post-deployment surveillance for
errors, bias, and drift.

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(b)
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At minimum, the health insurer shall track
and retain, by service category and as feasible by clinically relevant cohort,
the following performance and oversight metrics for examination:

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(1)
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Denial rate and approval rate;

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(2)
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Average time-to-decision;

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(3)
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Appeal rate and overturn rate;

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(4)
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Rate of clinician overrides of artificial
intelligence system-supported recommendations;

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(5)
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Material error rates identified through
audits or quality assurance reviews; and

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(6)
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Disparity indicators designed to detect
differential impacts on protected classes or other groups, as determined by the
commissioner by rule.

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(c)
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The commissioner may require submission of
aggregated metrics collected pursuant to this section in a form and frequency
determined by rule; provided that the commissioner shall maintain the
confidentiality of trade secrets and commercial information to the extent
permitted by law.

D.
�
Artificial
Intelligence Systems And Aerial Images In Residential Property Insurance

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431:13-K
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Definitions.
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As used in this subpart:

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"Adverse
underwriting action" or "action" means a cancellation,
nonrenewal, refusal to renew, reduction in coverage, or other adverse action
affecting the availability or terms of insurance coverage, as determined by the
commissioner by rule.
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"Adverse
underwriting action" includes any nonrenewal of insurance coverage for
which an aerial image is used as the sole basis for the nonrenewal.

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"Aerial
image" means an image or set of images of an insured property captured
from an airborne platform, including a manned aircraft, satellite, or unmanned
aerial vehicle.

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"Aerial-image-derived
output" means a score, classification, recommendation, or other output
generated by an artificial intelligence system, machine learning model, or
analytics process that is materially based on an aerial image.

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"Residential
property insurance" means any homeowners or property insurance policy issued
for a residential property in the State, as determined by the commissioner by
rule.
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"Residential property
insurance" includes personal lines insurance.

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431:13-L
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Adverse underwriting action based solely on
aerial images; limitations; notice requirement.
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(a)
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Except
as provided in this subpart, no insurer shall take an adverse underwriting
action on a residential property insurance policy using an aerial image or
aerial-image-derived output as the sole basis for the action.

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(b)
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An insurer may use an aerial image or aerial‑image‑derived
output as the sole basis for the nonrenewal of a residential property insurance
policy; provided that the insurer shall include with the written notice of
nonrenewal:

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(1)
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The date-stamped aerial image or images
used to justify the action, with clear identification of the specific condition
or characteristic the insurer asserts is out of compliance with the insurer's
underwriting guidelines;

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(2)
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Disclosure of the use of an artificial
intelligence system or similar analytics process;

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(3)
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A plain-language explanation of the
specific underwriting issue; and

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(4)
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Clear instructions describing how the consumer
may rebut the asserted issue or certify completion of corrective action
sufficient to cure the issue pursuant to section 431:13-M.

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(c)
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Following the issuance of the notice required
pursuant to subsection (b) and upon request of the consumer, the insurer shall
provide to the consumer a copy of the relevant aerial‑image-derived
output in a form understandable to a reasonable person; provided that the
insurer shall not be required to disclose proprietary source code or trade
secrets in fulfilling the disclosure requirement under this subsection.
�

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(d)
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No insurer shall utilize an aerial image
older than twelve months at the time the insurer initiates a nonrenewal notice
as the basis for that nonrenewal; provided that an insurer may utilize an older
aerial image if the insurer demonstrates to the commissioner that a longer
period is reasonably necessary due to documented limitations in imagery
availability for the relevant geography.
�

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(e)
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The commissioner may adopt rules pursuant to
section 431:13-C to:

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(1)
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Establish a maximum aerial image or
aerial‑image‑derived output utilization period; provided that the
established period shall not exceed twenty-four months; and

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(2)
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Ensure disclosures pursuant to
subsections (b) and (c) balance transparency and consumer comprehension with
protection of proprietary information.

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431:13-M
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Point of contact; rebuttal; cure period.
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(a)
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Each
insurer shall designate a point of contact to receive communications from
consumers regarding a nonrenewal based solely on an aerial image or
aerial-image-derived output.
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The insurer
shall include a contact method for the designated point of contact in the
notice required pursuant to section 431:13‑(L)(b).
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(b)
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The consumer shall have a cure period of not
less than sixty days from the date the insurer transmits the notice required
pursuant to section 431:13-L(b) to address the adverse underwriting action.
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During the cure period, the consumer may:

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(1)
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Submit documentation disputing the
insurer's interpretation of the aerial image, including photographs, inspection
reports, contractor statements, or similar evidence; or

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(2)
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Certify completion of corrective action
addressing the identified condition.

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(c)
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The insurer shall review any information
submitted pursuant to subsection (b) in good faith and shall provide a written
determination of its review to the consumer within a timeframe established by
the commissioner by rule.

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431:13-N
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Renewal after cure; limitation on repeated
nonrenewal for same condition.
�

(a)
�
If the consumer timely cures
the identified condition or successfully rebuts the asserted underwriting issue
to the satisfaction of the insurer, the insurer shall offer a renewal on
substantially similar terms; provided that nothing in this subsection shall
prohibit nonrenewal for reasons unrelated to the condition identified through
the aerial image or aerial-image-derived output.

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(b)
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The commissioner may adopt rules pursuant to
section 431:13-C to prevent repeated nonrenewals based on substantially the
same alleged condition without meaningful consideration of rebuttal or cure
documentation submitted by a consumer.

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431:13-O
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Cross-insurer sharing of aerial image
information without consent; prohibited.
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No insurer shall sell, transfer, or otherwise share with another insurer
any aerial image, aerial-image-derived output, or underwriting determination
derived from an aerial image that is reasonably linkable to an identified
consumer or insured property without having obtained the written consent of the
consumer in the manner prescribed by the commissioner by rule."

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SECTION
3.
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If any provision of this Act, or the
application thereof to any person or circumstance, is held invalid, the
invalidity does not affect other provisions or applications of the Act that can
be given effect without the invalid provision or application, and to this end
the provisions of this Act are severable.

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SECTION
4.
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This Act shall take effect on July 1,
2026.

INTRODUCED BY:

_____________________________

Report Title:

Insurance
Commissioner; Artificial Intelligence Systems; Health Benefit Determinations;
Aerial Images; Residential Property Insurance; Consumer Protections; Rules

Description:

Establishes
consumer protections and insurer governance requirements for the use of
artificial intelligence systems in certain insurance practices, including
health insurance benefit determinations and residential property underwriting
decisions.
�
Establishes review,
monitoring, recordkeeping, disclosure, rebuttal, and cure requirements for the
use of artificial intelligence systems in certain insurance practices.
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Requires the Insurance Commissioner to adopt
rules.

The summary description
of legislation appearing on this page is for informational purposes only and is
not legislation or evidence of legislative intent.