Racial bias is one of the reasons African Americans pay more for insurance while facing debt collection at high rates. A study by the Consumer Federation of America shows that insurance premiums are 70% higher in communities where African Americans make up at least three-quarters of the population than in communities where they make up one-quarter of the population
Dismantling bias is vital if the insurance industry wants to thrive and live up to its founding principles of fairness and equity. With the help of unconscious bias training, policymakers, decision-makers, and stakeholders in insurance have a chance to renew their commitment to helping everyone in society access a financial safety net.
Fighting Racial Bias in the Age of AI
Insurance companies of all sizes are adopting AI technology to streamline their operations and improve service delivery. However, biased algorithms are preventing these firms from offering their insurance products to people of all classes and races in society.
AI technology that relies on biased historical data can deny a section of the population access to insurance. Additionally, the compromised algorithms may assess risks differently for certain races, and in turn, this can lead to the inaccessibility of affordable insurance coverage to certain communities.
Besides amplifying biases in insurance underwriting and pricing, biased AI technology also affects insurance processing. Such AI technology may settle similar claims differently for policyholders from different races. The speed at which these algorithms handle the claims may also show unfair treatment of policyholders based on ethnicity or race.
Redlining has also allowed insurance companies to deny their coverage to populations in certain locations, especially those with larger numbers of African Americans. Despite being outdated, the practice is still behind various ongoing inequalities in insurance company service provision.
Steps Insurance Companies Are Taking to Dismantle Bias
Insurance firms need to be fair and equitable on paper and in practice. Likewise, their services need to offer value to all individuals, irrespective of their racial, educational, or financial background.
Employees in insurance firms can benefit from unconscious bias training. For instance, the information the leadership and management team get from UBT sessions can help them realize the firm’s diversity, equity, and inclusion goals.
Meanwhile, insurance underwriters and actuaries can make objective decisions when assessing risks and setting premiums, thanks to UBT. Lastly, training biased AI technology and algorithms using diverse and representative data is the first step toward dismantling bias in automated systems.