News: 2022 Press Release
LOS ANGELES – Today Insurance Commissioner Ricardo Lara issued a Bulletin reminding insurance companies that bias and discriminatory use of consumers’ data have no place in the California insurance marketplace. As a champion for all consumers, Commissioner Lara is committed to use all tools to prevent unfair practices targeting Californians, many of whom are low-income and from communities of color, and to ensure consumer protections are upheld under California’s Unruh Civil Rights Act and several other Insurance Code laws.
“I have serious concerns that insurance companies’ increasing use of consumers’ data will exacerbate inequities or cause consumers to be charged more, either deliberately or inadvertently,” said Commissioner Lara. “Algorithms and artificial intelligence are susceptible to the same biases and discrimination we have historically seen in insurance. I am committed to fighting to protect Californians by ensuring fair and equal treatment for all, and investigating unfair and discriminatory practices.”
Commissioner Lara’s Bulletin specifically reminds insurance companies and other Department licensees of their obligation to conduct business, charge premiums, investigate fraud, and pay claims in a way that avoids bias and discrimination.
This has become even more of a concern as insurance companies embrace artificial intelligence and ‘Big Data’, which rely on machine learning and other tools prone to human bias when identifying trends of particular groups based on certain characteristics. This technology has opened the door to an increase in unfair discrimination targeting certain groups of individuals based on characteristics not related to the risk they present.
The Department is currently looking into several recent examples of potential bias and alleged unfair discrimination in many lines of insurance resulting from the use of technology and data, including:
In order to ensure that all Californians are treated equally, Commissioner Lara’s Bulletin directs all persons engaged in the business of insurance in California to review all applicable laws and train their staffs on the proper application of and full compliance with all laws applicable to insurance. California law prohibits discrimination in insurance ratemaking, claims handling practices, accepting insurance applications, and when canceling or nonrenewing insurance policies. Additionally, insurers and licensees must provide transparency to Californians by informing consumers of the specific reasons for any adverse underwriting decisions.
As stated in Commissioner Lara’s Bulletin, the Department reserves the right to audit and examine all insurer business practices including an insurer’s marketing, rating, claim, and underwriting criteria, programs, algorithms, and models. If an investigation reveals an insurer or other person engaged in the business of insurance is not in compliance with all state and federal laws, the Department will use its authority to take disciplinary action.
The Department also encourages anyone who feels they, or someone they know, may have been discriminated against or faced unfair bias with their claim, premium, or interaction with their insurance company to contact the Department’s Consumer Services team at 800-927-4357 or online at www.insurance.ca.gov so we can investigate further.
In addition to today’s Bulletin, Commissioner Lara will announce a regulatory workshop this summer to investigate bias and discrimination in California’s insurance market. The workshop will investigate recent allegations, open a new chapter of exploration for potential regulatory solutions, and hold an open discussion with all stakeholders.
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Led by Insurance Commissioner Ricardo Lara, the California Department of Insurance is the consumer protection agency for the nation’s largest insurance marketplace and safeguards all of the state’s consumers by fairly regulating the insurance industry. Under the Commissioner’s direction, the Department uses its authority to protect Californians from insurance rates that are excessive, inadequate, or unfairly discriminatory, oversee insurer solvency to pay claims, set standards for agents and broker licensing, perform market conduct reviews of insurance companies, resolve consumer complaints, and investigate and prosecute insurance fraud. Consumers are urged to call 1-800-927-4357 with any questions or contact us at www.insurance.ca.gov via webform or online chat. Non-media inquiries should be directed to the Consumer Hotline at 800-927-4357. Teletypewriter (TTY), please dial 800-482-4833.
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