In a novel regulatory move, the Colorado Division of Insurance (CDI) has formally proposed its draft ‘Testing Regulation’, focusing heavily on bias present within life insurance underwriting processes. The regulation itself, which was made public on September 28, 2023, marks the first attempt of its kind to assess potential racial and ethnic biases at play within underwriting practices.
According to details of the proposed regulation, it specifically pertains to underwriting processes that involve the use of external consumer data and information sources (ECDIS), as well as the application of algorithms and predictive models that utilise ECDIS (Models). The apparent aim of the regulation is to ensure that fairness and equality underpin the underwriting process, an endeavor that involves the implementation and maintenance of rigorous testing protocols.
The CDI’s endorsement of this unprecedented regulation shows that they are actively acknowledging and addressing potential issues of implicit bias within the industry. Moreover, it directs a clear message to all insurers – potential biases, whether acknowledged or not, are now under regulatory scrutiny. Insurers who do not endeavor to address this issue may face crippling consequences.
Still, not everyone is in agreement with this regulation. As measures against implicit bias are still relatively novel, many companies and industry experts are wary to fully embrace these emerging changes. Concerns about the cost, efficacy, and intrusiveness of testing protocols have been among the key points raised. However, if this gamble by the CDI pays off, we may see many more such measures sprouting across jurisdictions globally, prompting a wider industry shift.
The CDI’s Testing Regulation, if passed, is poised to set the global industry standard, casting a wide impact on corporate practices. Legal experts and insurance leaders alike are currently undertaking rigorous analysis to understand the true impacts of this decision for the ecosystem.
For further reading, please refer to the original draft proposal by the Colorado Division of Insurance here.