Colorado AI Act obligations on high-risk AI deployers in regulated industries
In Colorado, the first comprehensive state law aimed at deploying artificial intelligence (AI) has come into effect, obliging healthcare providers, insurance companies, and financial institutions to ensure their use of AI systems is transparent, accountable, and explainable. This development demands immediate action from organisations buying or deploying AI in these sectors, as it sharpens exposure to capability risk, governance risk, and liability risk.
The Colorado AI Act requires high-risk AI deployers to implement an “Explainability and Transparency Plan,” detailing how they will ensure AI decision-making is transparent and explainable. This plan must include an assessment of potential biases in data and AI models used for high-stakes decisions, as well as a description of the procedures for explaining AI-based outcomes to users. Moreover, high-risk deployers must have a plan for addressing and mitigating risks associated with AI deployment.
Organisations deploying AI systems in regulated sectors are now accountable for what these systems do and say. The Colorado AI Act creates an obligation for organisations to ensure their AI systems can be audited by regulators and are capable of defending decision-making processes when questioned by boards or courts. Failure to comply may result in legal liability, reputational damage, and financial losses.
To mitigate exposure under the new law, prudent organisations should take the following strategic steps:
1. Conduct a thorough risk assessment for AI systems used in high-stakes decisions.
2. Implement an Explainability and Transparency Plan as outlined by the Colorado AI Act.
3. Develop procedures for explaining AI-based outcomes to users.
4. Establish a process for addressing potential biases in data and AI models.
Straven & Co examines AI decisions before they are acted on, independently testing the proposed solution against real operations, people, governance obligations, and legal exposure, and delivering a plain verdict: proceed, proceed with conditions, or do not.