Rhode Island 2023 Regular Session

Rhode Island House Bill H5734 Compare Versions

Only one version of the bill is available at this time.

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5	5	2023 -- H 5734
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7	7	LC000039
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9	9	S TATE OF RHODE IS LAND
10	10	IN GENERAL ASSEMBLY
11	11	JANUARY SESSION, A.D. 2023
12	12	____________
13	13
14	14	A N A C T
15	15	RELATING TO STATE AFFAIRS AND GOVERNMENT -- DEPARTMENT OF BUSINE SS
16	16	REGULATION
17	17	Introduced By: Representative Joseph M. McNamara
18	18	Date Introduced: February 21, 2023
19	19	Referred To: House Corporations
20	20
21	21
22	22	It is enacted by the General Assembly as follows:
23	23	SECTION 1. Chapter 42-14 of the General Laws entitled "Department of Business 1
24	24	Regulation" is hereby amended by adding thereto the following sections: 2
25	25	42-14-20. Insurers' use of external consumer data and information sources, 3
26	26	algorithms, and predictive models -- Unfair discrimination prohibited -- Rules -- Stakeholder 4
27	27	process required. 5
28	28	(a) In addition to the methods and practices prohibited pursuant to title 27 and title 42, an 6
29	29	insurer shall not, with regard to any insurance practice: 7
30	30	(1) Unfairly discriminate based on race, color, national or ethnic origin, religion, sex, 8
31	31	sexual orientation, disability, gender identity, or gender expression; or 9
32	32	(2) Pursuant to rules adopted by the director of the department of business regulation (the 10
33	33	"director") after consultation with the health insurance commissioner (the "commissioner"), use 11
34	34	any external consumer data and information sources, as well as any algorithms or predictive models 12
35	35	that use external consumer data and information sources, in a way that unfairly discriminates based 13
36	36	on race, color, national or ethnic origin, religion, sex, sexual orientation, disability, gender identity, 14
37	37	or gender expression. 15
38	38	(b)(1) The director, in consultation with the commissioner, shall adopt rules for the 16
39	39	implementation of this section. 17
40	40	(2) The director, in consultation with the commissioner, shall engage in a stakeholder 18
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44	44	process prior to the adoption of rules for any type of insurance that includes carriers, producers, 1
45	45	consumer representatives, and other interested parties. The director, in consultation with the 2
46	46	commissioner, shall hold stakeholder meetings for stakeholders of different types of insurance to 3
47	47	ensure sufficient opportunity to consider factors and processes relevant to each type of insurance. 4
48	48	The director, in consultation with the commissioner, shall provide notice of stakeholder meetings 5
49	49	on the department of business regulation’s website, and stakeholder meetings shall be open to the 6
50	50	public. 7
51	51	(c)(1) After the stakeholder process described in subsection (b)(2) of this section, the 8
52	52	director, in consultation with the commissioner, shall adopt rules and regulations for specific types 9
53	53	of insurance, by insurance practice, which rules and regulations establish means by which an 10
54	54	insurer may demonstrate, to the extent practicable, that it has tested whether its use of external 11
55	55	consumer data and information sources, as well as algorithms or predictive models using external 12
56	56	consumer data and information sources, unfairly discriminates based on race, color, national or 13
57	57	ethnic origin, religion, sex, sexual orientation, disability, gender identity, or gender expression. The 14
58	58	rules and regulations shall not become effective prior to January 1, 2024, at the earliest, for any 15
59	59	type of insurance, and the director and the commissioner shall consider solvency impacts, if any, 16
60	60	to insurers in adopting the rules. This process shall comply with the provisions of chapter 35 of title 17
61	61	42 ("administrative procedures"). 18
62	62	(2) Rules adopted pursuant to this section shall require each insurer to: 19
63	63	(i) Provide information to the director or commissioner concerning the external consumer 20
64	64	data and information sources used by the insurer in the development and implementation of 21
65	65	algorithms and predictive models for a particular type of insurance and insurance practice; 22
66	66	(ii) Provide an explanation of the manner in which the insurer uses external consumer data 23
67	67	and information sources, as well as algorithms and predictive models using external consumer data 24
68	68	and information sources, for the particular type of insurance and insurance practice; 25
69	69	(iii) Establish and maintain a risk management framework or similar processes or 26
70	70	procedures that are reasonably designed to determine, to the extent practicable, whether the 27
71	71	insurer's use of external consumer data and information sources, as well as algorithms and 28
72	72	predictive models using external consumer data and information sources, unfairly discriminates 29
73	73	based on race, color, national or ethnic origin, religion, sex, sexual orientation, disability, gender 30
74	74	identity, or gender expression; 31
75	75	(iv) Provide an assessment of the results of the risk management framework or similar 32
76	76	processes or procedures and actions taken to minimize the risk of unfair discrimination, including 33
77	77	ongoing monitoring; and 34
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81	81	(v) Provide an attestation by one or more officers that the insurer has implemented the risk 1
82	82	management framework or similar processes or procedures appropriately on a continuous basis. 2
83	83	(3) The rules adopted by the director in consultation with the commissioner pursuant to 3
84	84	this section shall include provisions establishing: 4
85	85	(i) A reasonable period of time for insurers to remedy any unfairly discriminatory impact 5
86	86	in an algorithm or predictive model; and 6
87	87	(ii) The ability of insurers to use external consumer data and information sources, as well 7
88	88	as algorithms or predictive models using external consumer data and information sources, that have 8
89	89	been previously assessed by the division and found not to be unfairly discriminatory. 9
90	90	(4) Documents, materials, and other information in the possession or control of the 10
91	91	department of business regulation that are obtained by, created by, or disclosed to the director, the 11
92	92	commissioner, or any other person pursuant to this section or any rules adopted pursuant to this 12
93	93	section are recognized as proprietary and containing trade secrets. All such documents, materials, 13
94	94	and other information shall be deemed confidential and privileged and not subject to disclosure 14
95	95	under the provisions of title 38 ("public records") or similar laws of this state; are not subject to 15
96	96	subpoena; and are not subject to discovery or admissible in evidence in any private civil action. 16
97	97	However, the director and the commissioner may use the documents, materials, or other 17
98	98	information in the furtherance of any regulatory or legal action brought as part of the director or 18
99	99	commissioner’s official duties. The director and the commissioner shall not otherwise make the 19
100	100	documents, materials, or other information public without the prior written consent of the insurer 20
101	101	from which the documents, materials, or other information was obtained. The director and the 21
102	102	commissioner may make data publicly available in an aggregated or de-identified format in a 22
103	103	manner deemed appropriate by the director and the commissioner. 23
104	104	42-14-21. Investigations and reporting -- Definitions. 24
105	105	(a) The director or the commissioner may examine and investigate an insurer's use of an 25
106	106	external consumer data and information source, algorithm, or predictive model in any insurance 26
107	107	practice. Insurers shall cooperate with the director and commissioner and the department of 27
108	108	business regulation (the "department") in any examination or investigation under this section. 28
109	109	(b)(1) The director shall provide a report to the governor and the general assembly by 29
110	110	December 31, 2024, and annually by December 31 thereafter. This report shall include: 30
111	111	(i) Information concerning any rules adopted pursuant to § 42-14-20; 31
112	112	(ii) Information concerning any changes in insurance rates that have resulted from the 32
113	113	prohibitions described in § 42-14-20; 33
114	114	(iii) A summary of the stakeholder engagement process described in § 42-14-20; and 34
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118	118	(iv) A description of data sources, if any, discussed during the stakeholder engagement 1
119	119	process, which data sources insurers may use to comply with § 42-14-20. 2
120	120	(c) The provisions of § 42-14-20 and § 42-14-21 shall not apply to: 3
121	121	(1) Title insurance; 4
122	122	(2) Bonds executed by qualified surety companies; or 5
123	123	(3) Insurers issuing commercial insurance policies, except that this section and § 42-14-20 6
124	124	shall apply to insurers that issue business owners' policies or commercial general liability policies, 7
125	125	which business owners' policies or commercial general liability policies have annual premiums of 8
126	126	ten thousand dollars ($10,000) or less. 9
127	127	(d) Nothing in this section or § 42-14-20: 10
128	128	(1) Requires an insurer to collect from an applicant or policyholder the race, color, national 11
129	129	or ethnic origin, religion, sex, sexual orientation, disability, gender identity, or gender expression 12
130	130	of an individual; or 13
131	131	(2) Shall be construed to: 14
132	132	(i) Prohibit the use of, or require life, annuity, long-term care, or disability insurers to test, 15
133	133	medical, family history, occupational, disability, or behavioral information related to a specific 16
134	134	individual, which information, based on actuarially sound principles, has a direct relationship to 17
135	135	mortality, morbidity, or longevity risk unless such information is otherwise included in the testing 18
136	136	of an algorithm or predictive model that also uses external consumer data and information sources; 19
137	137	(ii) Prohibit the use of, or require life, annuity, long-term care, or disability insurers to test, 20
138	138	traditional underwriting factors being used for the exclusive purpose of determining insurable 21
139	139	interest or eligibility for coverage unless such factors are otherwise included in the testing of an 22
140	140	algorithm or predictive model that also uses external consumer data and information sources; or 23
141	141	(iii) Prohibit the use of or require the testing of longstanding and well-established common 24
142	142	industry practices in settling claims or traditional under writing practices unless such practices or 25
143	143	factors are otherwise included in the testing of an algorithm or predictive model that also uses 26
144	144	external consumer data and information sources. 27
145	145	(e) As used in this section and § 42-14-20, unless the context otherwise requires: 28
146	146	(1) "Algorithm" means a computational or machine learning process that informs human 29
147	147	decision making in insurance practices. 30
148	148	(2) "Commissioner" means the state health insurance commissioner. 31
149	149	(3) "Department" means the department of business regulation. 32
150	150	(4) "Director" means the director of the department of business regulation. 33
151	151	(5) "External consumer data and information source" means a data or an information source 34
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155	155	that is used by an insurer to supplement traditional underwriting or other insurance practices or to 1
156	156	establish lifestyle indicators that are used in insurance practices. "External consumer data and 2
157	157	information source" includes credit scores, social media habits, locations, purchasing habits, home 3
158	158	ownership, educational attainment, occupation, licensures, civil judgments, and court records. The 4
159	159	director, in consultation with the commissioner, may promulgate rules to further define "external 5
160	160	consumer data and information source" for particular lines of insurance and insurance practices. 6
161	161	(6) "Insurance practice" means marketing, underwriting, pricing, utilization management, 7
162	162	reimbursement methodologies, and claims management in the transaction of insurance. 8
163	163	(7) "Predictive model" means a process of using mathematical and computational methods 9
164	164	that examine current and historical data sets for underlying patterns and calculate the probability 10
165	165	of an outcome. 11
166	166	(8) "Unfairly discriminate" and "unfair discrimination" include the use of one or more 12
167	167	external consumer data and information sources, as well as algorithms or predictive models using 13
168	168	external consumer data and information sources, that have a correlation to race, color, national or 14
169	169	ethnic origin, religion, sex, sexual orientation, disability, gender identity, or gender expression, and 15
170	170	that use results in a disproportionately negative outcome for such classification or classifications, 16
171	171	which negative outcome exceeds the reasonable correlation to the underlying insurance practice, 17
172	172	including losses and costs for underwriting. 18
173	173	SECTION 2. This act shall take effect upon passage. 19
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180	180	EXPLANATION
181	181	BY THE LEGISLATIVE COUNCIL
182	182	OF
183	183	A N A C T
184	184	RELATING TO STATE AFFAIRS AND GOVERNMENT -- DEPARTMENT OF BUSINE SS
185	185	REGULATION
186	186	***
187	187	This act would prohibit the use of any external consumer data and information sources, as 1
188	188	well as any algorithms or predictive models that use external consumer data and information 2
189	189	sources, in a way that unfairly discriminates based on race, color, national or ethnic origin, religion, 3
190	190	sex, sexual orientation, disability, gender identity, or gender expression, by an insurer in regard to 4
191	191	any insurance practice. The act would further direct the director of business regulation, in 5
192	192	consultation with the health insurance commissioner, to promulgate rules and regulations to enforce 6
193	193	these provisions. 7
194	194	This act would take effect upon passage. 8
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