Exam DISC-DA Practice Question 231
Study guide: Exam DISC-DA
An insurer's new homeowners pricing model does not use race or any other protected characteristic as an input. An outside test finds that, for households in predominantly minority neighborhoods, average premiums are 12% above what their average loss costs would support, while for other households premiums and loss costs are in line. Which conclusion is best supported?
- A) The model cannot discriminate, because no protected characteristic is an input
- B) The difference must reflect expected cost, because the model was fitted to loss data
- C) Inputs may act as proxies for race; test and review the variables driving the gap
- D) The insurer must stop writing homeowners business in the affected neighborhoods
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