Every legislative session produces a head-scratcher of a bill that seems like a solution in search of a problem.
In 2021, that would be Senate Bill 169. It’s a well-intentioned bill seeking to protect consumers from unfair discrimination in insurance ratings. But it’s vague enough to cause consternation that it will raise auto insurance rates on everyone.
If that’s even a remote possibility, Gov. Jared Polis should veto it. It’s already against state and federal law to price insurance in ways that unfairly discriminatory. This bill just creates regulatory authority based on a confusing, arbitrary standard.
SB-169 prohibits the use of any external consumer data and information source, algorithm, or predictive model that unfairly discriminates against an individual based on race, color, national or ethnic origin, religion, sex, sexual orientation, disability, or transgender status.
But nobody seems to know yet what that means. Could factors such as homeownership, credit scores or ZIP codes be considered proxies for race? Critics contend that the bill gives the state’s insurance commissioner wide latitude to make that call. The fear is that limiting the data that insurance companies can use for underwriting blows up their actuarial models for assessing risk, thus leading to higher premiums for everyone.
That can’t be what the bill’s supporters had in mind.
Diane Schwenke, president and CEO of the Grand Junction Area Chamber of Commerce worries that rural Coloradans will be casualties of the bill.
Rural communities, where roads are less congested, safer and are the sources of fewer insurance claims, pay a lower rate than highly populated urban and suburban areas where roads are congested, accidents are more frequent, and claims are higher. If insurance companies are barred from using location as a factor in rate-setting, rural drivers could be rated “as if we drive I-25 every day,” she said.
“It feels like this is a feel-good piece of legislation where nobody was actually considering the actual consequences on our workforce, small businesses and rural areas,” Schwenke said.
Robust competition in the marketplace allows consumers to shop to find the lowest rate. Different insurance companies use different variables to set those rates and all of the methodology was already subject to scrutiny by the Division of Insurance before the advent of SB-169. The division has existing tools to inquire, audit and reject rates if they run afoul of the commissioner’s due diligence.
If the bill pinches on competition, it discourages innovation in the industry, which is what creates availability in the industry. Again, what if an unintended consequence of SB-169 is that it ends up hurting the very populations it seeks to protect?
Colorado already has a mandate to prevent any unfair discrimination and a framework to reject discriminatory rates.
Polis should veto this bill as an affirmation that the tools to ensure equity and fairness are already in place.