NAIC to discuss examining insurers’ use of data & potential oversight of 3rd-party vendors in confronting racial inequities in p/c sector

The Special (EX) Committee on Race & Insurance formed by the organization state insurance commissioners to reckon with barriers to diversity, accessibility and inclusion in the insurance sector is starting its work by posing many questions on current practices and data use.

While answers may be on the long-term horizon, regulators are digging into insurers’ manifold use of data and data mining — and even considering their own collection for future analysis, to help achieve racial equality.

The National Association of Insurance Commissioners is wrestling with a path forward on equitable application of all elements of insurance, from underwriting practices to hiring to analysis to agent licensing requirements.

One of the most far-reaching areas where regulation meant to ensure racial equality and fairness could potentially expand in a now data-driven world is in the use of this wealth of information.

Based on an NAIC list of potential issues for the special committee to consider in the property casualty sector is future regulation of third party vendors that create algorithm for pricing.

“Third-party vendors are often not licensed as advisory organizations in the states. These vendors provide supplementary rating information and rating and scoring models for clients but do not file with states,” the Oct. 29 NAIC document says.

The discussion list is part of the NAIC’s materials for a public discussion of p/c subject material Nov. 12. The p/c arena is one of five work-streams under the purview of the NAIC’s special executive level committee. These work-streams are listed below.

The NAIC could also consider collection of information from insurers in order to monitor discrimination and/or disparate impact on communities, according to the discussion points listed.

Another practice state regulators might examine is claims settlement.

For example, some commissioners of insurance might want to know if fraud detection techniques unfairly discriminate by using prior convictions which may be impacted by policing practices.

Regulators will also be discussing access to insurance among disadvantaged groups, and examine the affordability of auto and homeowners insurance looking at past studies and history compiled on the subject. The online shift of insurers and its effect on reaching economically disadvantaged groups will also be probed.

Details for the Thursday meeting are here.

The NAIC is also hosting a public call Nov. 18 to hear from interested parties on work-stream one.

This category includes discussions and statements on the current level of diversity and inclusion within the insurance industry, practices or barriers that potentially disadvantage people of color and/or historically underrepresented groups, steps state regulators and/or the insurance industry can take to increase diversity and inclusion and address practices that potentially disadvantage people of color and/or historically underrepresented groups.

The special committee’s five work-streams, based on the the NAIC’s website, are:

Work-stream One:
Research / analyze level of diversity and inclusion within the insurance industry. Make recommendations on action steps.

Work-stream Two:
Research / analyze level of diversity and inclusion within the NAIC and state insurance regulator community. Make recommendations on action steps.

Work-stream Three:
Examine and determine which practices or barriers exist in the insurance sector that potentially disadvantage people of color and/or historically underrepresented groups in the p/c line of business. Make recommendations on action steps.

Work-stream Four:
Examine and determine which practices or barriers exist in the insurance sector that potentially disadvantage people of color and/or historically underrepresented groups in the life insurance and annuities lines of business. Make recommendations on action steps.

Work-stream Five:
Examine and determine which practices or barriers exist in the insurance sector that potentially disadvantage people of color and/or historically underrepresented groups in the health insurance. Make recommendations on action steps.

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