Antidiscrimination Insurance Pricing: Regulations, Fairness Criteria, and Models

Xi Xin and Fei Huang

North American Actuarial Journal, 2024, vol. 28, issue 2, 285-319

Abstract: On the issue of insurance discrimination, a grey area in regulation has resulted from the growing use of big data analytics by insurance companies: direct discrimination is prohibited, but indirect discrimination using proxies or more complex and opaque algorithms is not clearly specified or assessed. This phenomenon has recently attracted the attention of insurance regulators all over the world. Meanwhile, various fairness criteria have been proposed and flourished in the machine learning literature with the rapid growth of artificial intelligence (AI) in the past decade and have mostly focused on classification decisions. In this article, we introduce some fairness criteria that are potentially applicable to insurance pricing as a regression problem to the actuarial field, match them with different levels of potential and existing antidiscrimination regulations, and implement them into a series of existing and newly proposed antidiscrimination insurance pricing models, using both generalized linear models (GLMs) and Extreme Gradient Boosting (XGBoost). Our empirical analysis compares the outcome of different models via the fairness–accuracy trade-off and shows their impact on adverse selection and solidarity.

Date: 2024
References: Add references at CitEc
Citations:

Downloads: (external link)
http://hdl.handle.net/10.1080/10920277.2023.2190528 (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:taf:uaajxx:v:28:y:2024:i:2:p:285-319

Ordering information: This journal article can be ordered from
http://www.tandfonline.com/pricing/journal/uaaj20

DOI: 10.1080/10920277.2023.2190528

Access Statistics for this article

North American Actuarial Journal is currently edited by Kathryn Baker

More articles in North American Actuarial Journal from Taylor & Francis Journals
Bibliographic data for series maintained by Chris Longhurst ().