American data analytics company Verisk has launched a new solution for insurers to assess their underwriting models for unfair pricing discrimination against certain protected classes.

Known as FairCheck, the solution consists of a customisable and scalable methodology and a consultative service.

Insurers can use this fairness-as-a-service solution to assess their personal lines models and variables to mitigate the potential risk of unfairly discriminatory outcomes, including the evaluation before regulatory submissions.

According to Verisk, the use of predictive models and other automated tools is increasing along with the heightened emphasis on diversity, equity and inclusion.

This is has further resulted in enhanced regulatory scrutiny on the efficacy of modern techniques to prevent unfairly discriminatory outcomes.

Verisk said its solution enables insurers to respond to all these developments while allowing them to fulfil the distinct requirements across various states.

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“We took a proactive approach in assessing our own personal auto rating model to determine whether there were unfair pricing differentials regarding race,” said Verisk analytics senior vice-president Adrian Cuc.

“We discovered that race was not a contributing factor in our model. The analysis serves as a foundation for our FairCheck solution that is customisable to assess individual insurer models, different variables within their models and various geographical regions for potential unintended bias.

“It is a meaningful step in measuring and understanding what impact, if any, race may play in insurer pricing models. By understanding its potential impact, an insurer can determine whether they need to begin to evaluate and mitigate the potential for unfairly discriminatory outcomes.”

Leveraging its insurance databases, the company has developed a methodology to investigate the impact of race on personal lines pricing models and provide a quantified measure of its contribution to loss costs.

This methodology was also reviewed by the Maguire Academy of Insurance and Risk Management, within the Haub School of Business of Saint Joseph’s University.

In August 2023, Verisk launched a cloud-based system, ClaimSearch, to counter insurance fraud in Israel.