2023 -- H 5734

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LC000039

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     STATE OF RHODE ISLAND

IN GENERAL ASSEMBLY

JANUARY SESSION, A.D. 2023

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A N   A C T

RELATING TO STATE AFFAIRS AND GOVERNMENT -- DEPARTMENT OF BUSINESS

REGULATION

     

     Introduced By: Representative Joseph M. McNamara

     Date Introduced: February 21, 2023

     Referred To: House Corporations

     It is enacted by the General Assembly as follows:

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     SECTION 1. Chapter 42-14 of the General Laws entitled "Department of Business

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Regulation" is hereby amended by adding thereto the following sections:

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     42-14-20. Insurers' use of external consumer data and information sources,

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algorithms, and predictive models -- Unfair discrimination prohibited -- Rules -- Stakeholder

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process required.

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     (a) In addition to the methods and practices prohibited pursuant to title 27 and title 42, an

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insurer shall not, with regard to any insurance practice:

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     (1) Unfairly discriminate based on race, color, national or ethnic origin, religion, sex,

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sexual orientation, disability, gender identity, or gender expression; or

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     (2) Pursuant to rules adopted by the director of the department of business regulation (the

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"director") after consultation with the health insurance commissioner (the "commissioner"), use

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any external consumer data and information sources, as well as any algorithms or predictive models

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that use external consumer data and information sources, in a way that unfairly discriminates based

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on race, color, national or ethnic origin, religion, sex, sexual orientation, disability, gender identity,

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or gender expression.

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     (b)(1) The director, in consultation with the commissioner, shall adopt rules for the

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implementation of this section.

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     (2) The director, in consultation with the commissioner, shall engage in a stakeholder

 

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process prior to the adoption of rules for any type of insurance that includes carriers, producers,

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consumer representatives, and other interested parties. The director, in consultation with the

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commissioner, shall hold stakeholder meetings for stakeholders of different types of insurance to

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ensure sufficient opportunity to consider factors and processes relevant to each type of insurance.

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The director, in consultation with the commissioner, shall provide notice of stakeholder meetings

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on the department of business regulation’s website, and stakeholder meetings shall be open to the

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public.

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     (c)(1) After the stakeholder process described in subsection (b)(2) of this section, the

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director, in consultation with the commissioner, shall adopt rules and regulations for specific types

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of insurance, by insurance practice, which rules and regulations establish means by which an

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insurer may demonstrate, to the extent practicable, that it has tested whether its use of external

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consumer data and information sources, as well as algorithms or predictive models using external

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consumer data and information sources, unfairly discriminates based on race, color, national or

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ethnic origin, religion, sex, sexual orientation, disability, gender identity, or gender expression. The

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rules and regulations shall not become effective prior to January 1, 2024, at the earliest, for any

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type of insurance, and the director and the commissioner shall consider solvency impacts, if any,

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to insurers in adopting the rules. This process shall comply with the provisions of chapter 35 of title

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42 ("administrative procedures").

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     (2) Rules adopted pursuant to this section shall require each insurer to:

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     (i) Provide information to the director or commissioner concerning the external consumer

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data and information sources used by the insurer in the development and implementation of

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algorithms and predictive models for a particular type of insurance and insurance practice;

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     (ii) Provide an explanation of the manner in which the insurer uses external consumer data

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and information sources, as well as algorithms and predictive models using external consumer data

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and information sources, for the particular type of insurance and insurance practice;

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     (iii) Establish and maintain a risk management framework or similar processes or

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procedures that are reasonably designed to determine, to the extent practicable, whether the

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insurer's use of external consumer data and information sources, as well as algorithms and

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predictive models using external consumer data and information sources, unfairly discriminates

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based on race, color, national or ethnic origin, religion, sex, sexual orientation, disability, gender

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identity, or gender expression;

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     (iv) Provide an assessment of the results of the risk management framework or similar

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processes or procedures and actions taken to minimize the risk of unfair discrimination, including

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ongoing monitoring; and

 

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     (v) Provide an attestation by one or more officers that the insurer has implemented the risk

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management framework or similar processes or procedures appropriately on a continuous basis.

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     (3) The rules adopted by the director in consultation with the commissioner pursuant to

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this section shall include provisions establishing:

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     (i) A reasonable period of time for insurers to remedy any unfairly discriminatory impact

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in an algorithm or predictive model; and

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     (ii) The ability of insurers to use external consumer data and information sources, as well

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as algorithms or predictive models using external consumer data and information sources, that have

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been previously assessed by the division and found not to be unfairly discriminatory.

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     (4) Documents, materials, and other information in the possession or control of the

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department of business regulation that are obtained by, created by, or disclosed to the director, the

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commissioner, or any other person pursuant to this section or any rules adopted pursuant to this

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section are recognized as proprietary and containing trade secrets. All such documents, materials,

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and other information shall be deemed confidential and privileged and not subject to disclosure

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under the provisions of title 38 ("public records") or similar laws of this state; are not subject to

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subpoena; and are not subject to discovery or admissible in evidence in any private civil action.

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However, the director and the commissioner may use the documents, materials, or other

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information in the furtherance of any regulatory or legal action brought as part of the director or

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commissioner’s official duties. The director and the commissioner shall not otherwise make the

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documents, materials, or other information public without the prior written consent of the insurer

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from which the documents, materials, or other information was obtained. The director and the

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commissioner may make data publicly available in an aggregated or de-identified format in a

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manner deemed appropriate by the director and the commissioner.

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     42-14-21. Investigations and reporting -- Definitions.

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     (a) The director or the commissioner may examine and investigate an insurer's use of an

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external consumer data and information source, algorithm, or predictive model in any insurance

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practice. Insurers shall cooperate with the director and commissioner and the department of

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business regulation (the "department") in any examination or investigation under this section.

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     (b)(1) The director shall provide a report to the governor and the general assembly by

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December 31, 2024, and annually by December 31 thereafter. This report shall include:

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     (i) Information concerning any rules adopted pursuant to § 42-14-20;

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     (ii) Information concerning any changes in insurance rates that have resulted from the

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prohibitions described in § 42-14-20;

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     (iii) A summary of the stakeholder engagement process described in § 42-14-20; and

 

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     (iv) A description of data sources, if any, discussed during the stakeholder engagement

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process, which data sources insurers may use to comply with § 42-14-20.

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     (c) The provisions of § 42-14-20 and § 42-14-21 shall not apply to:

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     (1) Title insurance;

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     (2) Bonds executed by qualified surety companies; or

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     (3) Insurers issuing commercial insurance policies, except that this section and § 42-14-20

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shall apply to insurers that issue business owners' policies or commercial general liability policies,

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which business owners' policies or commercial general liability policies have annual premiums of

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ten thousand dollars ($10,000) or less.

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     (d) Nothing in this section or § 42-14-20:

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     (1) Requires an insurer to collect from an applicant or policyholder the race, color, national

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or ethnic origin, religion, sex, sexual orientation, disability, gender identity, or gender expression

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of an individual; or

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     (2) Shall be construed to:

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     (i) Prohibit the use of, or require life, annuity, long-term care, or disability insurers to test,

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medical, family history, occupational, disability, or behavioral information related to a specific

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individual, which information, based on actuarially sound principles, has a direct relationship to

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mortality, morbidity, or longevity risk unless such information is otherwise included in the testing

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of an algorithm or predictive model that also uses external consumer data and information sources;

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     (ii) Prohibit the use of, or require life, annuity, long-term care, or disability insurers to test,

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traditional underwriting factors being used for the exclusive purpose of determining insurable

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interest or eligibility for coverage unless such factors are otherwise included in the testing of an

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algorithm or predictive model that also uses external consumer data and information sources; or

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     (iii) Prohibit the use of or require the testing of longstanding and well-established common

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industry practices in settling claims or traditional under writing practices unless such practices or

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factors are otherwise included in the testing of an algorithm or predictive model that also uses

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external consumer data and information sources.

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     (e) As used in this section and § 42-14-20, unless the context otherwise requires:

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     (1) "Algorithm" means a computational or machine learning process that informs human

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decision making in insurance practices.

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     (2) "Commissioner" means the state health insurance commissioner.

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     (3) "Department" means the department of business regulation.

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     (4) "Director" means the director of the department of business regulation.

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     (5) "External consumer data and information source" means a data or an information source

 

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that is used by an insurer to supplement traditional underwriting or other insurance practices or to

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establish lifestyle indicators that are used in insurance practices. "External consumer data and

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information source" includes credit scores, social media habits, locations, purchasing habits, home

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ownership, educational attainment, occupation, licensures, civil judgments, and court records. The

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director, in consultation with the commissioner, may promulgate rules to further define "external

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consumer data and information source" for particular lines of insurance and insurance practices.

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     (6) "Insurance practice" means marketing, underwriting, pricing, utilization management,

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reimbursement methodologies, and claims management in the transaction of insurance.

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     (7) "Predictive model" means a process of using mathematical and computational methods

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that examine current and historical data sets for underlying patterns and calculate the probability

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of an outcome.

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     (8) "Unfairly discriminate" and "unfair discrimination" include the use of one or more

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external consumer data and information sources, as well as algorithms or predictive models using

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external consumer data and information sources, that have a correlation to race, color, national or

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ethnic origin, religion, sex, sexual orientation, disability, gender identity, or gender expression, and

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that use results in a disproportionately negative outcome for such classification or classifications,

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which negative outcome exceeds the reasonable correlation to the underlying insurance practice,

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including losses and costs for underwriting.

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     SECTION 2. This act shall take effect upon passage.

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EXPLANATION

BY THE LEGISLATIVE COUNCIL

OF

A N   A C T

RELATING TO STATE AFFAIRS AND GOVERNMENT -- DEPARTMENT OF BUSINESS

REGULATION

***

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     This act would prohibit the use of any external consumer data and information sources, as

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well as any algorithms or predictive models that use external consumer data and information

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sources, in a way that unfairly discriminates based on race, color, national or ethnic origin, religion,

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sex, sexual orientation, disability, gender identity, or gender expression, by an insurer in regard to

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any insurance practice. The act would further direct the director of business regulation, in

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consultation with the health insurance commissioner, to promulgate rules and regulations to enforce

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these provisions.

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     This act would take effect upon passage.

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