New Guidance on Insurers’ Use of Big Data and Algorithms in New York
January 25, 2019

Having concluded an investigation into New York life insurers’ underwriting guidelines and practices, the New York Department of Financial Services has issued Insurance Circular Letter No. 1 (2019) to advise insurers of their statutory obligations regarding the use of external consumer data and information sources in underwriting for life insurance.  Specifically, the circular letter focuses on two areas of concern.  First, an insurer should not utilize external data sources, algorithms, and predictive models for the purposes of underwriting or rating unless the insurer can independently establish that the processes do not collect or utilize prohibited criteria and that the underwriting or rating guidelines are not unfairly discriminatory.  For each underwriting or rating guideline, there must be a valid rationale or explanation that supports the differential treatment of similar risks.  Second, when providing the reason(s) for any declination, limitation, rate differential or other adverse underwriting decision provided to the insured or potential insured, that arises out of the use of external data sources or a predictive model, the insurer’s explanation should include details about all information upon which the insurer based its decision, including a disclosure of the source of such information.  A copy of the circular letter can be found here.

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