Consumer Federation: Insurance Departments Need to Investigate Racial Bias in Claims Handling and Antifraud Efforts After Disturbing New York Times Story
In a letter to the nation's commissioners sent today, the groups asked that each
In their letter (https://consumerfed.org/testimonial/groups-urge-state-insurance-departments-to-investigate-racial-bias-in-insurance-claim-handling/), the groups noted that prior research (https://consumerfed.org/cfa-studies-on-the-plight-of-low-and-moderate-income-good-drivers-in-affording-state-required-auto-insurance/) has shown that people of color often face disproportionately high insurance premiums "due in large part to structural racism and systemic biases in our society and history that often turn pricing models, algorithms, and the data that feed them, into proxies for race." They continued, "There is no reason to believe that those problems and their legacy somehow do not impact other aspects of the insurance system. Indeed, they certainly persist throughout the insurance system, including...the claims and anti-fraud practices of insurers." Both organizations have previously asked regulators to examine racial bias in insurance (https://consumerfed.org/wp-content/uploads/2020/06/CEJs-Call-on-Insurers-and-Regulators-to-Address-Systemic-Bias-and-Inherent-Racism-in-Insurance.pdf) - warning regulators about the very problem uncovered by the investigation: https://content.naic.org/sites/default/files/inline-files/CEJ%20Comments%209.8.20.pdf
According to the New York Times report,
The consumer advocates wrote that "exposing and fighting insurance fraud is critical for well-functioning insurance markets and for preventing escalating rates. However, fighting fraud must never be an excuse for unfair denials of claims or discrimination. Consumers deserve to have their claims fairly evaluated and not be judged according to either stereotypes or biased algorithms."
The groups are not aware of any Insurance Departments that have vigorously investigated the potential for racial bias in claims handling and anti-fraud procedures. Through its survey, the groups hope to learn if there are efforts underway in any state and what those Departments have found. They are also asking what level of community engagement Departments have organized to hear about discrimination experiences with insurance company claims handling and anti-fraud practices, as well as what technical expertise and additional resources Departments need in order to more effectively address the problem.
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