DENVER (AP) – Colorado lawmakers are considering billing prohibiting insurance companies from using consumer information obtained from external sources such as social media, court and home ownership records to determine insurance rates.
The measure would prevent insurers from using third-party location data to calculate higher insurance premiums based on race, national or ethnic origin, religion, gender, sexual orientation or disability. This data also includes a consumer’s creditworthiness, purchasing habits, and level of education.
The bill also applies to discriminatory data in algorithms and predictive models, systems used by insurance companies to assess risk-based characteristics that affect the rate proposed by the customer.
It was passed by the Senate Committee on Economics, Labor and Technology on Monday.
The use of external consumer data “can have a significant negative impact not only on the availability and affordability of insurance for protected consumer classes, but also on the use of such insurance,” says the text of the law.
“Algorithms are not inherently objective. They reflect not only the data used, but also the people who design them, ”said Democratic Senator Janet Buckner, sponsor of the measure.
The datasets used to train machines can contain biases or errors. As a result, machines “can hold past patterns and leave no room for social change,” she added.
During the hearing, several members of the Republican Committee raised concerns about the law requiring individuals to disclose more demographic information than insurance companies currently need. However, the bill sponsor said it did not.
“This calculation shouldn’t hurt you. This calculation is intended to take a look under the hood of the algorithms and the data that are used. So if the data is used properly, there is no problem, ”said Buckner.
After January 1, 2022, insurers using external data sources would have to submit information to the insurance department to investigate and investigate the external data source. If the insurance officer determines that the external data is being discriminated against, they can restrict or prohibit their use.
Witnesses who testified in support of the bill that data-driven insurance practices can contribute to cyclical economic disparities for people of color.
Bethany Pray, legal director at the Colorado Center on Law and Policy, testified in support of the law. She compared the problem to redlining, a 1930s banking practice of denying loans to certain minority neighborhoods and preventing residents from building wealth through home ownership.
“Insurance practices that overload risk-proportionate can make it difficult for Coloradans to obtain coverage or satisfy claims,” she said. They can also affect a family’s ability to send children to college, “save for the future and thrive.”
Charles Bell, consumer reporting program director who conducts consumer-centric research, said the nonprofit’s studies show that credit scores, education levels, and job title could all affect a consumer’s auto insurance rates.
“We found that a supermarket cashier with a high school degree may pay up to $ 455 more than someone who is a vice president of a supermarket with an executive degree,” said Bell.
In a 2015 report, Bell said that researchers collected online price quotes for each US zip code and found that consumers with great driving performance but bad credit could potentially pay $ 1,000 more in annual rewards than customers with great credit. “They would even pay about $ 1,141 more than the convicted drunk driver,” he said.
Those who testified against the bill, such as Roosevelt Mosley, a principal and advisory actuary at Pinnacle Actuarial Resources, said there should be more studies of the “extent of the problem” for discriminatory data practices before laws are put in place to regulate insurance companies.
Mosley reiterated the concerns of other opposition witnesses that the bill may harm rather than help consumers.
Mosley said that removing or restricting the use of risk-related traits by insurance companies could have “unintended consequences” that could lead to market instability and even increase premium prices.
Kelly Campbell, vice president of the American Property Casualty Insurance Association, who testified in the opposition, said it was already illegal for an insurer to discriminate unfairly.
“If the (Colorado Department of Insurance) does not have the tools to examine insurers’ practices in protecting consumers from related harm, this is a completely different discussion than the one that is being presented,” Campbell said.
Michael Conway, the state’s insurance commissioner, said the department did not have enough resources to test insurance companies’ algorithms. The bill, Conway said, would call for more accountability by having insurance companies “stress test” their data systems and reporting to the agency.
The bill was passed by the committee 4: 3 votes, with the Democrats in favor. It will next be discussed in the Senate, where it is expected to be passed in the Democratic-controlled legislature.
Nieberg is a corps member of the Associated Press / Report for America Statehouse News Initiative. Report for America is a not-for-profit national service program in which journalists report undercover issues to local newsrooms.
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