NAIC 2021 Summer National Meeting Opening Session Transcript

NAIC 2021 Summer National Meeting Opening Session Transcript:
NAIC President and Commissioner, Florida Office of Insurance Regulation, David Altmaier

Welcome to the National Association of Insurance Commissioners 232nd National Meeting in our 150-year history. I have missed the live exchange at our National Meetings and I am happy to be together once more. Our strong working relationships have without a doubt helped us navigate the last 19 months, and I am excited to have the opportunity to meet face-to-face with those of you who were able to join us here in Columbus and look forward to hearing the comments of those who are attending virtually. 

The hybrid approach to this National Meeting is a testament to the innovation and adaptability of our states, territories, and the NAIC. It feels good to have this opportunity to meet face-to-face and back to a new version of normal. We are indebted to the efforts of so many to get to this point.   

Throughout our history, the commissioners and the NAIC have come together to find solutions to the many challenges facing the insurance industry and the world. The organization has weathered two world wars; financial crises; countless natural disasters; pandemics and ever-changing laws over the past 150-years.  Each of these challenges have provided us with valuable lessons and caused us to rethink our old ways of doing things, which in turn has made the NAIC stronger and more resilient.

The COVID-19 pandemic is only the most recent example of state regulators coming together to tackle big, unanticipated issues.

The pandemic has created a host of new challenges for our regulatory system. As a result, the NAIC continues to test and implement new processes and technologies to better focus our efforts on supporting our members in their mission to protect consumers and maintain strong insurance markets.

To ensure the insurance sector could provide the critical services consumers needed throughout the pandemic, many states expanded the use of virtual platforms to provide healthcare, and offered flexible work arrangements and other innovations and accommodations.

The pandemic challenged insurer’s business models, processes, and practices. Insurance companies automated processes to speed the delivery of services. Auto insurers reviewed the impact of decreased driving on rating models, and how COVID-19 could impact underwriting and rate considerations going forward. 

These are just some of the highlights of the COVID-19 related issues NAIC members are examining. We are looking at the lessons we have learned so far, the benefits to consumers, and the potential unintended consequences to determine what modifications should be considered to existing laws and practices. NAIC members are committed to ensuring that consumers remain protected as we transition to whatever comes next.

The COVID-19 vaccine has been a gamechanger, however, we are also aware the pandemic and its impact on the insurance sector continues to evolve.

We remain vigilant and steadfast in our work with federal agencies to ensure access to testing, treatment, and vaccinations. As well as our commitment to combat misinformation surrounding insurance coverage.

The U.S. industry demonstrated its strong solvency position and overall resilience through its positive operating performance for 2020 and are poised to continue building even stronger solvency positions in 2021. The sector’s strength is due, in part, to the strong solvency and governance requirements that we instituted following the last financial crisis.

Your state insurance regulators and the NAIC remain committed to ensuring insurance companies can meet consumer demands and cover their obligations, and that insurance agents have the knowledge to adequately advise consumers about coverages and policies.

The pandemic highlighted both the improper marketing of health insurance and business insurance coverage gaps.

The Anti-Fraud Task Force and the Improper Marketing of Health Insurance Working Group combined forces to coordinate with regulators on a state and federal level to provide guidance and monitoring of the inappropriate marketing of health plans.

The NAIC continues to work with Congress to provide information and insights around business interruption insurance, promote resilience and mitigation, foster stable and competitive insurance markets, and ensure fair treatment of policyholders.

Cybersecurity is one of the most important topics for the insurance sector and businesses today.

It is paramount insurers and insurance producers find ways to protect the highly sensitive consumer financial and health information collected as part of the underwriting and claims processes. For the last four years, insurance regulators have been committed to finding ways to tackle this growing risk.

Director Farmer serves on the U.S. Department of the Treasury's Financial Banking and Information Infrastructure Committee, where he represents state commissioners in working with federal regulators to address cyber threats in the United States.

NAIC membership adopted several Cybersecurity Working Group recommendations and the insurance data security model law - which requires insurers and other entities licensed by state insurance departments to develop, implement and maintain an information security program; investigate any cybersecurity events; and notify the state insurance commissioner of such events. The data security model law has been adopted by 18 states, with several other states adopting similar laws. 

The NAIC membership also adopted a Cybersecurity Insurance and Identity Theft Coverage Supplement for the property/casualty annual financial statement to collect information about cybersecurity insurance markets.

I would strongly encourage states that have not passed the models to consider doing so.  Cybersecurity threats pose serious risks to companies and our state-based insurance system and the industry as a whole.  This is a threat that we cannot ignore.

Beyond cyber breaches, regulatory concerns about the use of consumer data by a variety of commercial, financial, and technology companies remain a priority for the NAIC.  State insurance regulators encourage innovation, but continue to scrutinize the underwriting, pricing and claims algorithms, and risk models associated with smart tools to ensure policyholders are being treated fairly and information is sufficiently protected.

The NAIC developed and adopted AI principles last year. We utilize those principles to evaluate the use of consumer data in innovative technologies feeding into algorithms and models involving artificial intelligence and machine learning.

The NAIC’s Innovation and Technology Task Force continues to provide forums and resource materials around new developments within the insurance sector. The task force and the AI principles offer guardrails around how these advances could affect consumer protection, privacy, insurer oversight, marketplace dynamics, and the state-based insurance regulatory framework.

Given the critical importance of these technology-related issues and their impact on insurance markets and consumers, we are taking the significant step of creating a new standing committee focused on innovation, AI and cybersecurity by the end of this year.

This will be the first new letter committee – the “H” Committee -- formed by NAIC members in decades.

The committee will help us better address a wide range of evolving and challenging issues in these important areas.

The H committee will be charged with monitoring developments and coordinating the NAIC’s work in the areas of innovation, AI, and cybersecurity that are impacting the insurance sector. The new committee will also develop regulatory models and guidance, as appropriate, to ensure our state-based system continues to keep pace with the rapidly evolving insurance sector.

There will be additional discussion about formation of this new committee during the Innovation and Technology EX Task Force meeting and we look forward to engaging stakeholders as the process moves forward. 

As part of our ongoing commitment to make sure historically under-represented groups are not adversely impacted within the insurance industry, we more clearly articulated the charges of the Special Committee on Race and Insurance and added new charges to existing committees.

The charges outline our commitment to take meaningful action in the months and years to come to ensure all consumers are treated fairly and equitably when it comes to both accessibility and affordability of insurance products.  This is not a new mission for us.  Since the 1960s, the NAIC and state insurance regulators have worked to fight overt and proxy discrimination, be it discriminatory underwriting and rating criteria or redlining.  As insurers increase their use of data, modeling, and other tools we must ensure that unfair discrimination is not imbedded in these new business approaches.  Similarly, we are committed to working with our state and federal legislative partners to advocate for greater accessibility to the insurance marketplace for people of color and other underrepresented groups.

Last year when we launched this Special Committee, we committed to a diverse, inclusive and member-led discussion on how to enhance consumer protections on race and insurance; looking inward and outward and focused on outcomes.  Our charges and the work we have done thus far provides us a course to follow.  As we have said many times before, we will not fix these problems in a year, but we are committed to the journey no matter how long it takes.

Our long history has shown us that one of the greatest strengths of our state-based system is to adapt when confronted with fundamental challenges.  We know additional progress is needed and we invite all stakeholders, industry, consumers, state legislators, federal government, and others to work with us to deliver on this commitment to consumers. 

State insurance regulators continue to grapple with Long-term Care insurance. This includes issues surrounding a shrinking market, the threat of insolvencies, and the impact of large rate increases on our most vulnerable residents.

Significant work has been completed to design a Multi-State Actuarial Framework or, as it is commonly referred to, an MSA Framework. This framework will help to address rate increase requests from insurers, but much more work is in store. This approach is designed to result in more actuarially appropriate increases being granted by impacted states in a timely manner and improve future rate parity across the states for all policyholders.

A detailed framework, documenting the operating features and actuarial considerations of the MSA process is currently available for public review and feedback. Our Long-Term Care Insurance Task Force, led by Commissioner Scott White and Commissioner Mike Conway, are monitoring the progress on this work and have the challenging task of balancing the financial aspects of the coverages and promises made to policyholders.  This work will likely spill-over into next year as the committee works through technical and operational aspects of the process, but I am pleased with their progress to date.

In addition to our efforts to help stabilize rate increases, we are also focused on the appropriateness of reduced benefit options provided by insurers, further examination of the adequacy of policy and claim reserves of long term care writers, facilitating innovative ideas in long term care, and engaging with the U.S. Treasury Inter-agency committee on long term care insurance matters.

We continue to face increasingly severe weather patterns across much of the U.S. with catastrophic losses in many markets. The NAIC and regulators continue to work with counterparts both domestically and internationally on the critical work of addressing climate and resiliency issues facing insurance consumers and insurance markets. 

The Climate Disclosure Workstream of the Executive Climate and Resiliency Task Force allowed states to report on the TCFD or the Climate Risk Exposure Survey, more than doubling the number of jurisdictions participating in its survey. This year, the District of Columbia, Delaware, Maine, Maryland, Massachusetts, Oregon, Pennsylvania, Rhode Island, and Vermont were added to the list of those participating in the survey - increasing the percentage of the market represented from 70 to 78 percent.

The NAIC and its Center for Insurance Policy and Research maintains a central web-based repository for agencies, academics, and other interested parties studying risks, resiliency building codes and the impact on insurance at naic.org. 

CIPR has also coordinated risk and resiliency assessments, disclosures, and workshops with FEMA and IBHS to help ensure states have the information necessary to foster stable insurance markets for its citizens.

On a related note, I would also like to highlight NAIC’s Center for Insurance Policy and Research special session on Tuesday morning from 8:30-10:30, entitled “Casualty Catastrophe Risk in the Time of Social Inflation: Landscape, Modeling, and Action.”  This session will explore the casualty catastrophe emerging risk landscape, tools available to understand it, and actions industry and regulators can take to address these risks.

NAIC’s communications department developed tools, educational material and social media messaging to educate consumers about their risks, coverage options, and mitigation techniques associated with severe weather.

At the national level, we remain committed to engaging with FEMA and other federal partners on climate risk issues, advocating for state mitigation grant tax parity, advocating for the reauthorization of the National Flood Insurance Program and increasing the private flood market. 

While my remarks so far have focused mainly on domestic priorities and activities, these same issues are increasingly the focus of international work. Supervisors from around the globe came together to share experiences and help one another in the face of COVID-19. This renewed spirit of collaboration carries forward as we look at challenges, risks and opportunities from issues like climate, diversity and inclusion, innovation and data, and cybersecurity. As organizations like the IAIS, Sustainable Insurance Forum, OECD and FSB address these issues, we will continue to contribute to and learn from international efforts. 

As we welcome this pivot to address emerging issues, we also remain committed to implementation of reforms, such as the IAIS’s holistic framework for systemic risk and ComFrame, the common framework for the supervision of internationally active insurance groups. We appreciate the ongoing contributions to these workstreams from both our relevant group-wide supervisors and insurance groups, which is important in particular as work progresses on the process to assess the comparability of the Aggregation Method to the insurance capital standard, the ICS.

While our passports may have gone unused during the pandemic, we have found virtual ways to foster the relationships and exchanges with our international counterparts. We continue to hold virtual bilateral meetings with key jurisdictions.

After having to cancel our 2020 International Forum, we were pleased to hold this year’s forum virtually which focused on a variety of important topics. We look forward to hosting the event in-person in Washington DC in 2022.

We also welcome you to join us for an upcoming conversation with FIO, EIOPA and other regulatory agencies during our October 19th webinar entitled “Update on the EU-U.S. Insurance Dialog Project.”

We also have been pleased with the level of participation in our virtual International Fellows program. In fact, starting in 2022, the Spring session will be virtual to continue broader availability and the Fall will be the traditional 6-week in-person session to continue an in-depth experience and exchange of ideas.

In addition to focusing on the big issues facing the insurance industry, the NAIC continues its efforts to enhance the products and services we offer to regulators and the industry.

Implementation of State Ahead, NAIC's strategic blueprint for the future, continues on pace. Some highlights of this initiative include enhanced tools for state insurance departments, improved modeling resources, and cloud migration. In the fall, the membership will work together to forecast what the insurance sector may look like several years into the future and start to build our State Ahead 2.0 plan. The State Ahead plan brings together the tools, talent and technology needed to help regulators ensure the US's preeminence as the largest single insurance market, not just for today, but for the generations of regulators to follow.

Today’s top priorities may be COVID-19, natural catastrophe and climate risks, diversity equity and inclusion, the impact of AI and big data, ensuring consumer data privacy, and addressing issues in the Long- Term Care market. But rest assured, our 100 or so committees, task forces, and subgroups are actively engaged in ensuring the many insurance issues facing consumers and the industry are being reviewed and properly addressed.

If our 150-year history has taught us anything, it is that we must keep our eyes on both today’s risks and the emerging risks of tomorrow.  Although we do not know exactly what the future will hold, our experience has shown us we are well suited to successfully handle anything that comes our way. We are committed to asking the necessary and tough questions. It’s our responsibility to future generations to make sure that we take a long view on issues. I’m proud of the resilience we all have displayed during the past several months. Our thoughts, decisions and actions will provide valuable insight for those we represent now and for those who will follow in our footsteps.

Over the next several days we will have an opportunity to hear from you. We look forward to the unique perspective each one of you bring as we know the best decisions come when we look at issues from multiple and diverse angles.

We appreciate your participation and insights.  I encourage you to engage as much as possible in the coming days. And I look forward to working and connecting with each of you. With that, I close this opening session of the two hundred and thirty-second session of the National Association of Insurance Commissioners.