Excerpt:
As consumers, regulators, and stakeholders demand more transparency and accountability with respect to how insurers’ business practices contribute to potential systemic societal inequities, insurers will need to adapt. One way insurers can do this is by conducting disparate impact analyses and establishing robust systems for monitoring and minimizing disparate impacts. There are several reasons why this is beneficial:
- Disparate impact analyses focus on identifying unintentional discrimination resulting in disproportionate impacts on protected classes. This potentially creates a higher standard than evaluating unfairly discriminatory practices depending on one’s interpretation of what constitutes unfair discrimination. Practices that do not result in disparate impacts are likely by default to also not be unfairly discriminatory (assuming that there are also no intentionally discriminatory practices in place and that all unfairly discriminatory variables codified by state statutes are evaluated in the disparate impact analysis).
- Disparate impact analyses that align with company values and mission statements reaffirm commitments to ensuring equity in the insurance industry. This provides goodwill to consumers and provides value to stakeholders.
- Disparate impact analyses can prevent or mitigate future legal issues. By proactively monitoring and minimizing disparate impacts, companies can reduce the likelihood of allegations of discrimination against a protected class and corresponding litigation.
- If writing business in Colorado, then establishing a framework for assessing and monitoring disparate impacts now will allow for a smooth transition once the Colorado bill goes into effect. If disparate impacts are identified, insurers have time to implement corrections before the bill is effective.
Author(s): Eric P. Krafcheck
Publication Date: 27 Sept 2021
Publication Site: Milliman
