New Academy Issue Brief Provides Actuarial and Regulatory Considerations on Use of Data, Predictive Modeling, and Risk Classification in Insurance Practices

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Jul 06, 2022, 14:36 ET

WASHINGTON, July 6, 2022 /PRNewswire/ -- A new issue brief from the American Academy of Actuaries Data Science and Analytics Committee (DSAC) and Property/Casualty Racial Equity Task Force provides a clear and thorough discussion of actuarial practices surrounding data, predictive modeling, and risk classification that are key considerations for public policymaking and regulatory efforts aimed at ensuring that insurance practices are not "unfairly discriminatory."

"Ensuring that the analysis of risk in the insurance context does not contribute to unfair discrimination is a priority of the American Academy of Actuaries," said DSAC Chairperson Dorothy Andrews. "Academy volunteers across actuarial practice areas are performing a high level of work and regularly engaging with regulators and legislators on issues of bias and the concept of unfair discrimination in insurance, and this new issue brief is a significant contribution to that effort."

The issue brief, An Actuarial View of Correlation and Causation: From Interpretation to Practice to Implications, delves into key questions about risk classification and insurance rating variables, particularly in the context of big data and predictive modeling. The issue brief aims to enhance the understanding of correlations of risk characteristics vs. causal relationships that are used in risk classification and ratemaking in actuarial practice. It also provides valuable information for potential public policy solutions meant to guard against spurious correlations and correlations that may lead to the application of prohibited rating variables.

For more information about the Academy's ongoing efforts promoting diversity, equity, and inclusion—including related Academy publications and comment letters to insurance regulators—visit the Academy's DE&I webpage.

The American Academy of Actuaries is a 19,500+ member professional association whose mission is to serve the public and the U.S. actuarial profession. For more than 50 years, the Academy has assisted public policymakers on all levels by providing leadership, objective expertise, and actuarial advice on risk and financial security issues. The Academy also sets qualification, practice, and professionalism standards for actuaries in the United States.

SOURCE American Academy of Actuaries