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Consumer watchdog Consumer Watchdog is calling on California’s insurance commissioner to protect state residents from the abuse of computer algorithms and artificial intelligence (AI) by insurers.
At a public hearing Wednesday called by the California Department of Insurance (CDI) to investigate bias and discrimination by insurance companies, Consumer Watchdog said the use of technology to set premiums and determine who can get insurance coverage is “a serious threat to Californians and a violation of California law. “
“Proponents of artificial intelligence, algorithms and Machine Learning claim that every advance in technology improves our lives. This has been proven to be a myth,” the organization said in a statement to Insurance Commissioner Ricardo Lar. “These technologies are mostly the product of human engineers working for large corporations. Their implicit decisions regarding the selection of data to include and the algorithms and models that manipulate the data will allow Insurance companies to cloak old-school discrimination in a false aura of technological infallibility.
When asked what impact the organization’s statement might have, Consumer Watchdog founder Harvey Rosenfield told Repairer Driven News, “We have 35 years of experience advocating for consumers in the insurance market … I think the commissioner should not only listen to us, but given our position , it would be a serious mistake for him to ignore us.”
In its statement, the organization cited the use of vehicle telematics as a major area of concern. It said a “vast wealth” of data is being used in ways that go beyond the limits set by California’s insurance code.
Under the Insurance Rate Reduction and Reform Act, known as Proposition 103, premiums must be based on “factors within the control of the motorist that can be objectively verified,” Consumer Watchdog said. “Insurance companies are now demanding that auto insurance premiums be allowed to be based on computer predictions of a driver’s risk of an accident based on a person’s ‘geographical location’, what time of day, how and when they drive. applies the brakes as well as potentially numerous other unknown factors based on the vast collection of unverified personal data collected as people shop, research and interact online.
Consumer Watchdog also accused carriers of “turning their policyholders’ personal data into a new source of profit,” selling data about their customers’ driving and shopping habits to “Wall Street data aggregators and advertisers.”
“By claiming that ‘telematics’ algorithms are trade secrets, insurance companies want to avoid another key tenet of California law: that insurance companies must open their books and justify every method and method, including the algorithms and models that determine rates.” aims to predict a person’s likelihood of getting into an accident in the future. “Telematics is moving the insurance rate setting process from an analyzable and auditable process to an arbitrary ‘smart black box’ system – where the legality of pricing and underwriting practices can never be verified,” it said.
The statement lists three other key areas of concern:
- The overcharging of top California customers by two auto insurers is known as “price optimization,” Consumer Watchdog said, based on research that shows certain motorists will tolerate modest but unreasonable premium increases. “An expert from Consumer Watchdog, who reviewed the evidence in an investigation at the Department of Insurance, concluded that Allstate overcharged some California insurers by $1 billion through price optimization,” he said. He urged Lara to impose “massive penalties” to punish Allstate and deter other companies from future violations.
- Using a driver’s occupation and education to determine premiums, CDI concluded, discriminates against low-income, non-white drivers. “The Consumer Watchdog has repeatedly objected to this illegal practice and asked the Commissioner to issue regulations to stop it. However, the Department continues to allow insurance companies to do so.”
- Relying on secret “bushfire risk scores” to determine whether a person is eligible for homeowners insurance and, if so, what their premium will be. While the new regulation passed by Lara requires insurance companies to fully disclose the models and algorithms they use, insurers will still be able to deny coverage and not renew existing policyholders based on wildfire risk scores.
Consumer Watchdog accused unnamed insurance companies of violating rules imposed by Proposition 103, which requires rates and premiums to be “set through a public process that requires insurance companies to use objective, verifiable data to base price projections on future claims,” company costs and profits. .”
Instead, “insurers are pressing the Commissioner to abandon this approach in favor of using hidden algorithms, models and AI that will lead to discrimination and higher prices,” Consumer Watchdog said.
“We urge the Commissioner to reject the glossy hype and easy promises made by insurance companies and Big Data firms seeking regulatory revenue at the expense of California consumers.”
Comments from the Consumer Watchdog to the Commissioner
Consumer Reports raises red flags about insurers’ telematics programs
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