Colorado lawmakers mulling rules for use of 'discriminatory' data
The bill has been released by the Business, Labor & Technology Committee and is moving to the Senate, where it is expected to pass.
A bill prohibiting insurance companies from using consumer information sourced from third parties, such as social media, court and homeownership records, when determining insurance rates is making its way through the Colorado state legislature.
Colorado Senate Bill 12-169 would prevent insurers from using third-party site data to discriminately charge higher insurance premiums based on race, national or ethnic origin, religion, gender, sexual orientation, or disability. Other data that insurers will be prohibited from using include a consumer’s credit score, purchasing habits and level of education.
SB 12-169 will also apply to discriminatory data contained in algorithms and predictive modeling systems that insurers use to assess risk-based characteristics that affect the proposed rate for an insured. The bill passed the Senate Business, Labor & Technology Committee on Monday, May 3.
The text of the bill claims that the use of external consumer data “may have a significant negative impact not only on the availability and affordability of insurance for protected classes of consumers but also the utilization of such insurance.”
Republican committee members raised concerns that the bill could potentially mandate individuals to disclose an increased level of democratic data than currently required by insurance companies, but the sponsor of the bill stated that the bill does not do that.
The bill passed the committee in a 4-3 vote and heads for debate at the Senate, where it is expected to pass the legislature.
If signed into law, Colorado insurers that use external data sources to determine insurance rates would have to submit disclosures to the Division of Insurance to examine and investigate the external data source beginning January 1, 2022. If it is found that the external source unfairly discriminates, the insurance commissioner can restrict or prohibit its use.
Consumer Reports issued a statement in support of the bill, noting that Colorado motorists with clean driving records “pay 33% more, on average, for coverage if they have a ‘fair’ credit score rather than an ‘excellent’ credit score, all else being equal.”
Further, drivers with “poor” credit scores are charged 72% more than excellent credit drivers for the same coverage. For minimum liability coverage, that is a $427 average annual credit penalty for drivers with perfect records, Consumer Reports found. Additionally, 35-year-old women face, on average, 3% higher premiums than men in Colorado, even if they have the same driving history.
Consumer Reports also recently found the use of occupation and education level when determining insurance rates disproportionately harms people of color.
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