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Triple-I blog | Actuaries tackle race in insurance pricing



The Casualty Actuarial Society (CAS) has developed a series of articles that examine the issue of race and insurance prices and try to contribute constructively to the policy discussion around it.

“Insurance pricing is a high thread,”

; says CAS. Actuaries must quantify and differentiate between a huge variety of risk variables while avoiding unfair discrimination. “As regulation and society’s understanding of discrimination develop, however, it is necessary for us to keep abreast of changes in how discrimination is defined and judged.”

CAS research has generated four articles – two published this week, two more to be published on March 31 – that define, quantify and propose methods to address unfair discrimination where it turns out to exist.

Confusion over insurance ratings is understandable, given the complex predictive models used today, which can lead to inappropriate comparisons and erroneous conclusions. Algorithms and machine learning promise a lot to help ensure fair pricing. However, research has shown that these tools can also reinforce prejudices that succeed in creeping into their programming.

Recent Colorado legislation requires insurance companies to demonstrate that their use of external data and complex algorithms does not discriminate against protected classes, as do other governmental and federal efforts to address perceived price distortions.

The actuarial discipline and the insurance industry are well positioned to continue to help decision makers and corporate decision makers understand and address these injustices.

The CAS journals published this week are:

Methods for quantifying discriminatory effects on protected classes in insurance

Approaches to tackling rasbias in financial services: Lessons for the insurance industry


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