Holistic AI’s Response to Colorado’s Bias Audit Proposals for Underwriting in Life Insurance

Holistic AI has submitted written comments to Colorado’s Division of Insurance in response to a draft algorithm and predictive model quantitative testing regulation for underwriting in life insurance as part of the consultation process for SB169. This follows the announcement of the enforcement of Governance and Risk Management Framework Requirements for Life Insurers due to be enforced from 14 November 2023.

Introduced to prohibit unfair discrimination from the use of external consumer data and information sources, algorithms, and predictive models in insurance practices in Colorado, SB169 was passed in the middle of 2021 and due to be enforced from 1 January 2023 at the earliest.

The draft regulation requires insurers to carry out annual testing to determine whether data sources, algorithms, or predictive models result in unfair discrimination based on inferred race/ethnicity using logistic regression for eligibility determinations and linear regression for insurance premiums.

Key takeaways from Holistic AI’s comments

While the quantitative assessment, or internal bias audit, is a step in the right direction to ensuring that insurance practices do not unfairly discriminate, Holistic AI raised points of contention around:

• The use of tools to infer race/ethnicity instead of relying on self-reported data
• The focus solely on race/ethnicity, particularly since the law prohibits discrimination based on race, color, national or ethnic origin, religion, sex, sexualorientation, disability, gender identity, or gender expression
• Using white insureds as a group of reference instead of the group with the highest rate since other group differences may be missed
• The need for independent testing to ensure the robustness of the quantitative assessments