What You Need to Know
- Colorado's law could affect issuers of annuities, disability insurance and long-term care insurance, as well as of life insurance.
- Insurers could use regulatory efforts and lawsuits to block implementation.
- Isaac Asimov was, sort of, here.
Colorado state lawmakers are trying to make robots and computers behave themselves.
They recently passed SB 169, a bill that prohibits insurers from using algorithms, external data sources and predictive modeling systems in ways that appear, from the perspective of the lawmakers, to discriminate against people based on “race, color, national or ethnic origin, religion, sex, sexual orientation, disability, gender identity, or gender expression.”
The new law applies to life, disability and long-term care insurance issuers, and to annuity issuers, as well as to property and casualty insurers.
Gov. Jared Polis, a Democrat, signed the bill into law earlier this month.
Lawmakers have tried to protect the ability of life, annuity, long-term care insurance and disability insurance issuers to use traditional underwriting factors, family history, medical test, occupational, disability and behavioral information that “based on actuarially sound principles, has a direct relationship to mortality, morbidity, or longevity risk.”
But the new law prohibits use of that kind of information, even when the information has a direct relationship to mortality, morbidity or longevity risk, if that information comes from an algorithm or predictive model that uses “external consumer data and information sources,” if use of that information has the result of unfairly discriminating against protected classes of people.
An insurance underwriting “algorithm” is a set of rules that either a computer or a human can use to make decisions about whether to sell insurance to an applicant, and how much to charge the applicant for the insurance.
A “predictive modeling system” is a software program that helps a computer use data, rules about how the world works, and statistical methods to make forecasts.
The new law defines “external consumer data and information source” as “a data or an information source that is used by an insurer to supplement traditional underwriting or other insurance practices or to establish lifestyle indicators that are used in insurance practices.”
Some of those new types of data sources are “credit scores, social media habits, locations, purchasing habits, home ownership, educational attainment, occupation, licensures, civil judgments and court records.”