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SB21-169

Restrict Insurers' Use Of External Consumer Data

Concerning protecting consumers from unfair discrimination in insurance practices.
Session:
2021 Regular Session
Subject:
Insurance
Bill Summary

An insurer is prohibited from:

  • Considering Unfairly discriminating based on an individual's race, color, national or ethnic origin, religion, sex, sexual orientation, disability, or transgender status gender identity in any insurance practice; or
  • Directly or indirectly Pursuant to rules adopted by the commissioner of insurance (commissioner), using any external consumer data and information source, algorithm, or predictive model (external data source) that unfairly discriminates against an individual based on an individual's race, color, national or ethnic origin, religion, sex, sexual orientation, disability, or transgender status gender identity.

After a stakeholder process, the commissioner shall adopt rules for specific types of insurance, by insurance practice, which rules establish means by which an insurer may demonstrate that it has tested whether its use of an external data source unfairly discriminates based on an individual's race, color, national or ethnic origin, religion, sex, sexual orientation, or gender identity. Any such rules shall not become effective until January 1, 2023, at the earliest, for any type of insurance. The rules must require each insurer to:

  • Provide information to the commissioner concerning the external data sources used by the insurer in the development and implementation of algorithms and predictive models for a particular type of insurance and insurance practice;
  • Provide an explanation of the manner in which the insurer uses external data sources for the particular type of insurance and insurance practice;
  • Establish and maintain a risk management framework that is reasonably designed to determine, to the extent practicable, whether the insurer's use of external data sources unfairly discriminates against individuals based on their race, color, national or ethnic origin, religion, sex, sexual orientation, or gender identity;
  • Provide an assessment of the results of the risk management framework and actions taken to minimize the risk of unfair discrimination, including ongoing monitoring; and
  • Provide an attestation by the insurer's chief risk officer that the insurer has implemented the risk management framework appropriately on a continuous basis.

Documents, materials, and other information in the possession or control of the division that are obtained by, created by, or disclosed to the commissioner or any other person pursuant to the new requirements are recognized as proprietary and containing trade secrets.

On and after January 1, 2022, an insurer that uses one or more external data sources in any insurance practice shall submit certain disclosures to the division of insurance. The commissioner of insurance (commissioner) may examine and investigate an insurer's use of an external data source. If the commissioner determines as a result of an insurer's compliance with the bill's reporting requirements that use of an external data source bears no direct causal relationship to insurance losses or to the condition of a property or applicant to be potentially insured and that the use of the external data source unfairly discriminates on the basis of an individual's membership in a protected class race, color, national or ethnic origin, religion, sex, sexual orientation, or gender identity, the commissioner may promulgate rules restricting or prohibiting the use of the external data source. issue an order to the insurer, which order shall be limited to:

  • Any necessary restitution for consumers; and
  • Any other action required to be taken by the insurer to remedy the unfair discrimination on a prospective basis.

In the department's annual "State Measurement for Accountable, Responsive, and Transparent (SMART) Government Act" report to the legislative committees of reference, the division of insurance shall include information concerning any changes in insurance rates that have resulted from the prohibitions described in the bill.

The requirements described in the bill do not apply to:

  • Title insurance;
  • Bonds executed by qualified surety companies; or
  • Insurers of exempt commercial policyholders.

(Note: Italicized words indicate new material added to the original summary; dashes through words indicate deletions from the original summary.)


(Note: This summary applies to the reengrossed version of this bill as introduced in the second house.)

Status

Introduced
Passed
Became Law

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Bill Text

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