The Casualty Actuarial Society has released two new research reports designed to guide the insurance industry toward proactive, quantitative solutions to identify, measure and address potential racial bias in insurance pricing.
“Defining Discrimination in Insurance” defines terms such as protected class, unfair discrimination, proxy discrimination, disparate impact, disparate treatment and disproportionate impact, providing historical and practical context for them. It also illustrates the inconsistencies in how different stakeholders define these terms.
“Understanding Potential Influences of Racial Bias on P&C Insurance: Four Rating Factors Explored” examines how credit-based insurance score, geographic location, homeownership and motor vehicle records may be impacted by racially biased policies and practices outside of insurance. The goal is to highlight the multidimensional impacts of systemic racial bias, as it may relate to insurance pricing.
The first two reports were released March 10.
“Methods for Quantifying Discriminatory Effects on Protected Classes in Insurance” discusses three approaches to defining and measuring fairness in predictive models. It also provides an overview of several bias mitigation techniques that can be performed during the input, modeling or output phase of a model once a set of fairness criteria has been adopted.
“Approaches to Address Racial Bias in Financial Services: Lessons for the Insurance Industry” examines issues of racial bias in lending practice for mortgages, personal and commercial lending, as well as credit-scoring. It describes solutions intended to address any potential bias, which may include government intervention, internal bias testing and monitoring measures, and development of new products to mitigate bias.
Source: Casualty Actuarial Society