, insurers must notify the insured or potential insured of the right to receive the specific reason(s) for a declination, limitation, rate differential or other adverse underwriting decision.<\/span><\/p>\nThe DFS reiterated that an insurer may not rely on the proprietary nature of a third-party vendor\u2019s algorithmic processes to justify a lack of specificity related to an adverse underwriting action, and that insurers must also provide notice to, and obtain consent from, consumers to access external data, where required by law or regulation. \u00a0According to the DFS, the failure to adequately disclose to a consumer the material elements of an algorithmic underwriting process (and the external data sources upon which it relies) may constitute an unfair trade practice under New York Insurance Law Article 24.<\/span><\/p>\nConclusion<\/b><\/h2>\n
<\/p>\n
On the one hand, insurers are in the business of discrimination\u2014a healthy 20-year-old will expect to pay less for life insurance than an ailing 90-year-old. On the other hand, there are legally mandated limits to the nature and type of discrimination allowed. Within this framework, the boundaries of permissible discrimination are often far from clear. The DFS\u2019 latest guidance indicates that not only is it closely monitoring companies\u2019 compliance with underwriting rules, but also that it believes that insurers may run afoul of the law by using criteria that has a \u201cdisparate impact\u201d on a protected class\u2014an issue that has received significant attention in the homeowners\u2019 insurance industry, but comparatively less with respect to other lines of insurance. This development highlights the need for companies to review their underwriting models to ensure that they are actuarially sound and do not unfairly discriminate against a protected class. <\/span><\/p>\nThe Circular is a bellwether for further action, including targeted enforcement investigations, by DFS. \u00a0DFS has made it clear that it expects insurers to independently audit those data sources to assure they do not collect or use impermissible data and to verify not only the actuarial soundness of guidelines that use that data, but also evaluate whether those guidelines have an adverse disparate impact on protected classes.<\/span><\/p>\n<\/div>\n<\/div> <\/div>\n <\/div>\n<\/section>\n\n \n <\/div>\n\n
\n
\n
<\/div> <\/div>\n <\/div>\n<\/section>\n","protected":false},"excerpt":{"rendered":"
On January 18, 2019, New York\u2019s Department of Financial Services (DFS) issued Circular Letter No. 1 (2019) to advise life insurers regarding the type of data that they may use when underwriting policies.<\/p>\n","protected":false},"author":9,"featured_media":8494,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"libsyn-item-id":0,"libsyn-show-id":0,"libsyn-post-error":"","libsyn-post-error_post-type":"","libsyn-post-error_post-permissions":"","libsyn-post-error_api":"true","playlist-podcast-url":"","libsyn-episode-thumbnail":"","libsyn-episode-widescreen_image":"","libsyn-episode-blog_image":"","libsyn-episode-background_image":"","libsyn-post-episode-category-selection":"","libsyn-post-episode-player_use_thumbnail":"none","libsyn-post-episode-player_use_theme":"custom","libsyn-post-episode-player_height":"90","libsyn-post-episode-player_width":"450","libsyn-post-episode-player_placement":"top","libsyn-post-episode-player_use_download_link":"","libsyn-post-episode-player_use_download_link_text":"","libsyn-post-episode-player_custom_color":"615e5f","libsyn-post-episode-itunes-explicit":"no","libsyn-post-episode":"","libsyn-post-episode-update-id3":"","libsyn-post-episode-release-date":"","libsyn-post-episode-simple-download":"available","libsyn-release-date":"","libsyn-post-update-release-date":"","libsyn-is_draft":"","libsyn-new-media-media":"","libsyn-post-episode-subtitle":"","libsyn-new-media-image":"","libsyn-post-episode-keywords":"","libsyn-post-itunes":"","libsyn-post-episode-itunes-episode-number":"","libsyn-post-episode-itunes-season-number":"","libsyn-post-episode-itunes-episode-type":"","libsyn-post-episode-itunes-episode-title":"","libsyn-post-episode-itunes-episode-author":"","libsyn-destination-releases":"","libsyn-post-episode-advanced-destination-form-data":"[]","libsyn-post-episode-advanced-destination-form-data-enabled":"","libsyn-post-episode-advanced-destination-form-data-input-enabled":false,"libsyn-post-episode-premium_state":"","libsyn-episode-shortcode":"","libsyn-episode-embedurl":"","footnotes":""},"categories":[174,123],"tags":[],"class_list":["post-8445","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-2019-svia-contributors","category-blog"],"yoast_head":"\n
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