Colorado Puts Annuity Data Regulation in Play
The state's requirements could have a big effect on how all financial services regulators approach AI and machine learning.
Two insurance regulatory law specialists say the effort that created the Colorado’s new unfair discrimination regulation of life insurance technology will likely expand to annuities.
The Colorado regulation will also do more to affect how insurers operate than other state efforts to address concerns about new forms of decision-support technology, the lawyers predicted.
Paige Waters, a partner at Locke Lord, and Stephanie O’Neill Macro, an attorney of counsel with the firm, talked about the new regulation of external consumer data and information sources, or ECDIS, in an email interview.
What it Means: Colorado’s requirements could have a big effect on how financial services regulators approach artificial intelligence, machine learning, traditional analytical systems and any new forms of technology.
The Regulation: The new rules require insurers to set up a governance system for preventing race-based discrimination involving ECDIS.
Regulators defined ECDIS to include “credit scores, social media habits, locations, purchasing habits, home ownership, educational attainment, licensures, civil judgments, court records, occupation that does not have a direct relationship to mortality, morbidity or longevity risk, consumer-generated internet of things data, and any insurance risk scores derived by the insurer or third-party from the above listed or similar data and/or information source.”
What’s Different: Colorado is the first state to address use of AI and other decision-support technology in insurance through a full-scale regulation, rather than a bulletin, Waters and Macro said.
Other states have merely prohibited an unlawful practice and provided mechanisms for punishing insurers that discriminate, the attorneys added.
In Colorado, the attorneys said, the state “proactively requires the creation of a risk management framework for the use of data and artificial intelligence, documentation and reporting on the insurer’s corporate governance and related policies and procedures as an affirmative obligation to prevent unfair discrimination.”
The Future: Michael Conway, the Colorado insurance commissioner, “has already publicly stated that he anticipates that the regulation will be expanded to include all lines of business,” Waters and Macro said.
They believe that another reason to expect the scope of the regulatory effort to expand is that the new regulation implements a state law that applies to forms of discrimination other than race-based discrimination.
For now, however, they believe that affected life insurers have the information they need to begin to comply with the new requirements.
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