Rate Me: Risk Assessment Drones and the Resurrection of Discriminatory Insurance Practices

By Barta, Lucas M. | Washington and Lee Law Review, Summer 2016 | Go to article overview

Rate Me: Risk Assessment Drones and the Resurrection of Discriminatory Insurance Practices


Barta, Lucas M., Washington and Lee Law Review


Table of Contents

I. Introduction.............................................1550

II. Development of Current Unfair Discrimination and Disparate Impact Jurisprudence.............................1554

A. Unfairly Discriminatory Insurance Practices....................................1554

B. The Disparate Impact Rule.....................................1558

III. Risk Assessment Drones: Introduction, Capabilities, and Current Regulations.....................................1562

A. Insurance Drones: Integration and Capabilities ....1562

B. Drone Regulations Today.....................................1564

IV. Potential Influences of Risk Assessment Drones on Unfairly Discriminatory Insurance Practices and Disparate Impacts.....................................1567

A. Erosion of the Relationship Between Insurers and Insureds.....................................1569

B. Potential Abuse of Data-Collection Capabilities..........1571

C. Unchecked Information-Sharing with Third Parties.....................................1574

V. Proposed Regulatory Framework for Insurance Drones.....................................1577

A. Current Regulatory Efforts and Inadequacies.......................1579

B. Identification of Risks and Exploration of Countermeasures to Unfair Discrimination and Disparate Impact.1582

1. Method for Identifying Potential Risks and Countermeasures.1583

2. Proposed Countermeasures.1585

a. Minimum Visitation Requirement for Human Agents.1585

b. Restrictions on Access, Retention, and Transfer of Drone-Gathered Data.1587

c. Regulatory Devices Promoting Transparent Accountability.1589

C. Entities Capable of Effectuating Regulatory Countermeasures.1592

1. States as Insurance Regulators.1592

2. Potential Federal Regulators.1594

3. Strengths and Weaknesses of Suggested Regulators.1595

VI. Conclusion.1599

I. Introduction

Consider Ethel Baxter, an elderly woman who has never missed so much as a car payment in her decades of credit history. Her claims record is essentially spotless-a dream policyholder for insurers. She lives in northern California, owns her own home, and has regular income from social security and a part-time job. Now imagine the conversation when her insurance provider tells Ethel that she is no longer eligible for property insurance because her home is located near wild brush that represents a fire hazard. Ethel has never heard of the brush impacting her policy before, nor did she have any meeting or conversation with a claims adjuster about it at any point. How could this have happened to such an outstanding policyholder like herself? Why didn't she have an opportunity to be heard, or at least understand the process? How did the insurance company decide her property was suddenly too high of a risk?

What if the decision wasn't even made by a real person? Ethel's insurer has just received an exemption to fly drones over insured properties for "risk assessment" and property surveillance. What if Ethel was evaluated by something without the ability to see beyond still-shots, numbers, and analytical formulas; something programmed to analyze and predict the future of her property without so much as a blink in her direction?

This is the danger that people like Ethel face with the rise of commercial insurance drones in risk assessment and claims adjustment.1 Insurance companies are at the forefront of a movement by commercial entities to take advantage of evolving drone technology.2 These insurers envision a world where drones will replace human agents in field operations across the industry, gathering, analyzing, and sharing data with a ruthless efficiency that the public has never seen.3 In this world, human agents will be necessary only to rubber-stamp the recommendations of a drone's analysis of a property.4 Proponents of drone integration laud their potential to offer crucial assistance in claims and assessment situations where a human agent would encounter danger and difficulty. …

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