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A.I., Big Data and the threat of proxy discrimination: a revolution in the U.S. insurance industry.

Photo: Mainframe computers lined up side-by-side in a long row in a high-tech storage facility.

Artificial Intelligence (“A.I.”) and mass data collection (“Big Data”) is changing the face of the insurance industry -- and not for the better for you and me.

Over the course of my legal career, I cannot tell you how many times I have been asked this question: “I just got in a little fender-bender.  No one got hurt.  Should I report it to my insurance company?”

The answer is yes, always be honest with your insurance company, because your carrier likely already learned about it (or eventually will learn about it) from some outside source: the owner of the other damaged vehicle, a police report, a body shop, etc.

But it was nothing like this.  A New York Times article dated April 10, 2019, entitled “A.I. Is Changing Insurance: Some technologies are better left in the laboratory,” by Sarah Jeong, examines a massive effort by insurance carriers to utilize machine learning and secret algorithms to collect both public and private data on customers.  Use of this data raises serious concerns about how and to what extent the insurance carriers may be engaging in what is called “proxy discrimination,” the use of facially-neutral information gained from other, “proxy” sources (i.e., not blatant racial or sex classification alone, but use of ZIP codes, grade point averages, credit card purchase information, facial recognition analysis, etc.), to identify targeted customers whom the carriers do not wish to insure, or will only insure at a higher premium payment.   

From the beginning of the New York Times article by Ms. Jeong:

A smartphone app that measures when you brake and accelerate in your car. The algorithm that analyzes your social media accounts for risky behavior. The program that calculates your life expectancy using your Fitbit.

This isn’t speculative fiction — these are real technologies being deployed by insurance companies right now. Last year, the life insurance company John Hancock began to offer its customers the option to wear a fitness tracker — a wearable device that can collect information about how active you are, how many calories you burn, and how much you sleep. The idea is that your Fitbit or Apple Watch can tell whether or not you’re living the good, healthy life — and if you are, your insurance premium will go down.

This is the cutting edge of the insurance industry, adjusting premiums and policies based on new forms of surveillance. It will affect your life insurance, your car insurance and your homeowner’s insurance — if it hasn’t already. If the Affordable Care Act’s protections for people with pre-existing conditions should vanish, it will no doubt penetrate the health insurance industry as well.

Proxy discrimination is a growing area of study in the law in the era of Big Data and A.I.  Sitting on the relative back-burner of legal jurisprudence for many years, fully expect an explosion of articles and analysis regarding proxy discrimination in the near future.  One such article is in draft and scheduled to be published in the Iowa Law Review in 2020 by Professors Anya Prince of the University of Iowa College of Law and Daniel Schwarcz of the University of Minnesota Law School and is tentatively entitled “Proxy Discrimination in the Age of Artificial Intelligence and Big Data.”  The article examines the risk of modern algorithms — which appear facially-neutral — to disproportionately harm members of protected classes in the U.S., i.e., discriminating on the basis of race, color, sex, national origin, age, disability, etc.

A copy of the preliminary draft Iowa Law Review article by Professors Prince and Schwarcz regarding proxy discrimination can be accessed here (account creation and login required):


There’s more – a lot more – ominous discussion in the New York Times article about deep dives by the insurance industry into your most intimate, private life.  This information will be used in all forms of insurance coverage, including liability insurance, which covers your car, home, boat, apartment, etc.

Here is a link to the New York Times article:


We’ll continue to cover this critical topic in additional blog posts in the future.

James Snyder