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:

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

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

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

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

process required.

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

insurer shall not, with regard to any insurance practice:

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

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

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

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

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

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

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

or gender expression.

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

implementation of this section.

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

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

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

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

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

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

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

public.

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

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

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

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

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

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

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

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

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

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

42 ("administrative procedures").

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

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

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

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

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

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

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

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

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

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

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

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

identity, or gender expression;

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

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

ongoing monitoring; and

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

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

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

this section shall include provisions establishing:

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

in an algorithm or predictive model; and

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

manner deemed appropriate by the director and the commissioner.

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

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

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

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

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

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

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

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

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

prohibitions described in § 42-14-20;

     (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

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

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

     (1) Title insurance;

     (2) Bonds executed by qualified surety companies; or

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

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

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

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

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

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

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

of an individual; or

     (2) Shall be construed to:

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

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

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

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

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

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

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

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

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

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

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

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

external consumer data and information sources.

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

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

decision making in insurance practices.

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

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

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

     (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

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

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

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

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

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

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

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

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

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

of an outcome.

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

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

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

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

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

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

including losses and costs for underwriting.

     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

***

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

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

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

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

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

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

these provisions.

     This act would take effect upon passage.

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