Research Paper Series on Race and Insurance Pricing

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The Casualty Actuarial Society is committed to diversity, equity and inclusion in all aspects of actuarial work and has produced four CAS Research Papers to help guide the insurance industry toward proactive, quantitative solutions to address potential racial bias in insurance pricing. Through these research papers, we aim to inspire and generate discussions about potential racial bias across all areas of insurance pricing and to encourage actuaries to lead the conversations with other stakeholders on this topic.
Research Paper 1 Methods for Quantifying Potential Bias
Methods for Quantifying Discriminatory Effects on Protected Classes in Insurance
By Roosevelt Mosley, FCAS, CSPA and Radost Wenman, FCAS

As the insurance industry focuses attention on potential racial bias across all practice areas, this paper examines three approaches to defining and measuring fairness in predictive models. It also provides an overview of several bias mitigation techniques that can be performed during the input, modeling, or output phase of a model once a set of fairness criteria has been adopted.
Research Paper 2 Lessons From Financial Services
Approaches to Address Racial Bias in Financial Services: Lessons for the Insurance Industry
By Members of the 2021 CAS Race and Insurance Research Task Force

This paper examines issues of racial bias in lending practice for mortgages, personal and commercial lending, as well as credit-scoring. It looks at these four areas and describes solutions intended to address any potential bias, which may include government intervention, internal bias testing and monitoring measures, and development of new products to mitigate bias.
Defining Descrimination
Defining Discrimination in Insurance
By Kudakwashe F. Chibanda, FCAS

This paper defines several terms that are currently being used in discussions around potential discrimination in insurance – protected class, unfair discrimination, proxy discrimination, disparate impact, disparate treatment, and disproportionate impact – and provides historical and practical context for them. It also illustrates the inconsistencies in how different stakeholders define these terms.

Please see errata for revisions made on September 23, 2022.
Understanding Potential Influences
Understanding Potential Influences of Racial Bias on P&C Insurance: Four Rating Factors Explored
By Members of the 2021 CAS Race and Insurance Research Task Force

This paper examines four commonly used rating factors in personal lines insurance – credit-based insurance score, geographic location, home ownership, and motor vehicle record – to understand how the data underlying insurance pricing models may be impacted by racially biased policies and practices outside of the system of insurance.

Do you have feedback on the Race and Insurance Pricing Research Series or an idea for additional topics for research on this issue? The CAS research committees are interested in your input to potential research projects. Submit your idea or feedback in the box below and it will be forwarded to the appropriate CAS research committee. Please include your name and e-mail address so that you can be contacted for further discussion about your idea, if the need arises.

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