DENVER () – Colorado lawmakers are considering a bill that would prohibit insurance companies from using consumer information collected from external sources, such as social media and court and home records, to set insurance rates.
This measure would prevent insurers from using data on third-party websites to charge higher insurance prices based on race, national or ethnic origin, religion, gender, sexual orientation or disability. These data also include consumer credit scores, shopping habits and level of education.
The bill also addresses discriminatory data in algorithms and predictive modeling, systems used by insurance companies to assess risk-based characteristics that affect the rate proposed by the customer.
It passed the Senate Committee on Trade, Labor and Technology on Monday.
The use of data on external consumers “can have a significant negative impact not only on the availability and affordability of insurance for protected consumer groups, but also on the use of this insurance,” the text of the bill states.
“Algorithms are not essentially objective.” They reflect not only the data used, but also the people who design it, “said Democratic Senator Janet Buckner, sponsor of the measure.
The datasets used to train machines may contain bias or errors, and as a result, machines may “maintain past patterns, leaving no room for social change,” she added.
During the hearing, several members of the Republican Committee expressed concern about a bill that obliges individuals to publish more demographic data than insurance companies currently require. However, the lawyer stated that he did not do so.
“This law won’t hurt you.” This law is to look under the hood of algorithms and data that are used. So if the data is used correctly, then it is not a problem, “said Buckner.
After 1 January 2022, insurance companies using external data sources would have to transmit data to the insurance division in order to examine and investigate the external data source. If the Insurance Commissioner finds the external data unfairly discriminatory, they may restrict or prohibit their use.
Witnesses who spoke in support of the bill said that data-based insurance practices could contribute to cyclical economic disparities for people of color.
Bethany Pray, the legal director of the Colorado Center for Law and Policy, testified in support of the bill. It has addressed this problem with redlining, a practice of banks in the 1930s when loans to certain minority neighborhoods were denied – preventing residents from building wealth through home ownership.
“Insurance practices that lead to risk-overcharging can make color colorants more difficult to cover or satisfy claims,” she said. They can also affect a family’s ability to send children to college, “save the future and prosper.”
Charles Bell, program director of Consumer Reports, which conducts consumer research, said studies by the nonprofit show that credit scores, education levels and jobs can affect auto insurance rates for consumers.
“We’ve found that a cashier at a high-school supermarket can pay up to $ 455 more than someone who is the vice president of a supermarket with an executive degree,” Bell said.
In a 2015 report, Bell said researchers had collected online quotes for every U.S. zip code and found consumers with excellent driving records, but bad credit could potentially pay $ 1,000 a year more than those with excellent credit. . “They would even pay $ 1,141 more than a convicted drunk driver,” he said.
Opponents of the bill, such as Roosevelt Mosley, chief and actuary of Pinnacle Actuarial Resources, said there should be more studies on the “scale of the problem” of discriminatory data practices before legislation can be enacted.
Mosley reiterated the fears of other opposition witnesses that the bill could harm consumers rather than help them.
Mosley said eliminating or restricting the use of insurance risk characteristics could have “unintended consequences” that could lead to market instability and even higher premium prices.
Kelly Campbell, vice president of the American Property Liability Insurance Association, who testified in opposition, said it was already against the law for the company to unfairly discriminate.
“If the Colorado Department of Insurance doesn’t have the tools to examine insurance companies’ practices to protect consumers from related harm, it’s a whole different discussion than what is presented,” Campbell said.
State Commissioner for Insurance Michael Conway said the department did not have enough resources to audit insurance companies’ algorithms. The bill, Conway said, would require more accountability by allowing insurance companies to “stress test” their data systems and report to the agency.
The bill passed the committee by a vote of 4: 3, with the Democrats in favor. He also heads for discussion in the Senate, where he is expected to pass a Democrat-dominated legislature.
Nieberg is a member of the pro