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(Aug. 10, 2020)

Summer 2020 Opening Session Prepared Remarks

NAIC President and South Carolina Insurance Director Ray Farmer's prepared remarks for the virtual Summer 2020 National Meeting Opening Session. 

Welcome to the NAIC Virtual Summer National Meeting. I think it's fair to say that 2020 is not the year any of us thought it would be. So much has happened in the past eight months, that it is hard to even know where to begin.


Over the past few months, we've seen the deaths of Ahmaud Arbery, Breonna Taylor and George Floyd and felt the pain the country is feeling over the loss of their lives. Also, we're saddened by the profound recent loss of two icons of the civil rights movement, Congressman John Lewis and the Reverend C.T. Vivian. Both men worked alongside Dr. Martin Luther King Jr., standing against racial injustice. The renewed focus on racial equality in society has generated a lot of discussions between our members and stakeholders. We understand the need to address discrimination and its impact on insurance products and to promote diversity in the insurance sector, particularly in senior leadership roles. On these issues, we will work to honor the legacies of those great civil rights leaders and others, by continuing to push for equal treatment and opportunity for all. We hope this endeavor will engage willing participants across the sector. Moments of historical reflection like this are rare, and none of us should want to be remembered as having taken the pass at doing the right thing and creating a lasting positive change. We've heard from insurance CEOs and they are committed to making this change. My fellow commissioners and I welcome those words and are going to hold them to it. We are looking at the regulatory side as well. I promise that we are going to hold a mirror up to ourselves just as we hold it up to the insurance sector.


We expect the NAIC to lead by example in the last few months. The NAIC as an organization has taken the first of many steps forward. The NAIC is currently recruiting for a diversity officer. They have restructured their operations to create an organization that is focused on culture and leadership, formed a Diversity, Equity and Inclusion Council, among other action steps, demonstrating organizational commitment to diversity. It is our duty as commissioners to not only promote diversity within the insurance sector, but to address racial inequality in the development and access of insurance products.


I encourage all of you to attend our special session on August 13th from 3:00 to 5:00 p.m., where we will look at the history of insurance, examine what the NAIC and state insurance regulators can do to identify and address any potentially ongoing racial discriminatory practices. This session will operate primarily as a listening session designed to help inform further targeted NAIC activity. My hope, one shared by my fellow officers, is this initiative will unite us all across the sector in common cause. Unfair discrimination against a protected class in any form, whether intentional or not, should not stand. A regulatory system and insurance in general is a reflection of the society it aims to protect. And while state insurance regulators have worked to eliminate overt discrimination and racism, we all have been increasingly aware that unconscious bias is just as damaging to society. For that and other reasons, the executive committee formed a special committee devoted to race and insurance. The committee is co-chaired by me and NAIC President-Elect, David Altmaier, Vice President Dean Cameron and Secretary-Treasurer Chlora Lindley-Myers, will serve as co-vice chair for the committee. The committee has the engagement of the vast majority of members, and their passion for this issue is undeniable. I know my colleagues have been moved by other members' personal stories and struggles with discrimination and prejudice. This committee will engage with a broad group of stakeholders on issues related to race, equity, diversity and inclusion. By year-end, this committee will report its findings and develop steps that insurance regulators and the insurance industry can take to increase diversity and inclusion and address practices that potentially disadvantage minorities to ensure ongoing engagement of the NAIC on these issues charges to the existing committees, task forces and working groups.


One of the areas the NAIC has already taken a stand on is proxy discrimination. The Artificial Intelligence Working Group adopting guiding principles to inform an established general expectation for AI actors and systems that emphasize the importance of accountability, compliance and transparency while providing safe, secure and robust outputs. These principles will be used to assist regulators in NAIC committees addressing insurance specific A.I. applications. We anticipate these principles will be interpreted and applied in a manner that promotes innovation and protects the consumer from harm while accommodating the nature and pace of change in the use of A.I. by the insurance industry. I assure you that my fellow commissioners are committed to addressing these important subjects, and I hope you will engage with us as part of this historic opportunity to make a difference.


It's a very telling sign of the tumultuous year we've had thus far that my second topic for today is a historic global pandemic. I don't think it's a stretch to say this is the health crisis of our lifetime in terms of its impact on people's lives, finances and futures. I'm proud to say that when confronted with this crisis, this organization, the sector did not blink, did not break and once again showed strength and resiliency. The pandemic has forced us to think outside the box and come up with creative solutions for meetings and work. After we decided not to meet in person for the Spring National Meeting, the NAIC put together a virtual session on the potential impact of COVID-19. On March 20th, experts from government, industry, consumer advocate groups, as well as nearly 3,000 participants, joined us for what would be the first of many discussions about the impact of the pandemic.

Since that time, the NAIC fielded multiple requests for relief from 22 different industry, consumer and health provider associations. Collectively, insurance commissioners issued more than a thousand different bulletins, requests and actions, all focused on protecting consumers. States acted quickly to remove consumer cost-sharing for COVID-19 testing and continue to work with federal officials to implement similar measures approved by Congress. In addition, most states issued bulletins to clarify that insurers must cover early prescription drug refills, suspend prior authorization and expand coverage of telemedicine.

They also took steps to ease the administrative burden on carriers and agents and expand the pool of providers during the outbreak. As with other lines of insurance, several states required life insurance to defer premium payments and suspend cancelations and non-renewals. Life insurers were also instructed to waive fees and penalties and allow payment plans for premiums to avoid a lapse in coverage. Insurance producers are in direct contact every day with Americans, helping them to make important financial decisions. Ensuring those producers had the knowledge and personal integrity to fulfill their obligations was critical. The NAIC worked with the National Insurance Producer Registry (NIPR) on recommended best practices and a bulletin template for guidance on the implementation of a temporary license class was distributed to states. Together, we will continue to do the technical work required for states to extend renewal deadlines or offer temporary licenses electronically through NIPR. To help consumers, legislators and business owners understand the impacts of COVID-19, the NAIC created a Coronavirus Resource Center. The website provides access to third-party resources, searchable information on state actions and content specifically created by the NAIC, including archived research from past pandemics. Academics from the Wisconsin School of Business have also weighed in on business interruption insurance and special enrollment periods.

The NAIC communications department worked with states and subject matter experts to create consumer bulletins on coverage information related to all lines of insurance. As with many crises, fraud remains a major concern. States and the NAIC have also issued warnings to consumers about potential COVID-19 related scams, such as robocalls and text messages advertising bogus miracle cures, free at-home test kits and scams claiming assistance with obtaining federal government stimulus checks.

Throughout this crisis, the NAIC has worked to keep the insurance sector financially strong by assisting state insurance regulators who are monitoring the financial health of insurers. These efforts include finding and evaluating company exposures to COVID-19 related risks.

The NAIC has provided reports to the states for their use in evaluating the potential impact of the market downturn on insurance company assets. Evaluating company exposures has involved identifying those companies whose products put them at the greatest risk of being impacted, as well as those companies that are at great risk due to interest rate cuts.

States working through the NAIC had developed a national information request template that gathers data from insurers of their exposure to potential COVID-19 claims and the impact of the related economic downturn on their assets. The NAIC has also completed a resource and guidance document of COVID-19 assumptions that State regulators may use when reviewing carrier rights submissions for 2021. The statutory accounting working group issued new accounting and reporting guidance for treatment of overdue mortgages and due dates of quarterly filings to allow more time for the insurers to collect premiums before reporting the receivables is not admitted in the statutory financial statements.

I'm proud to say our efforts in this crisis and leading up to it have resulted in the U.S. insurance market being recognized as the most financially secure of any global market in the pandemic.


One of the most talked about insurance lines during this pandemic has been business interruption insurance. My fellow commissioners and I have reviewed hundreds of policies on behalf of our constituents.

Not surprisingly, our informal findings mirror the recent industry data call, which found that 83 percent of all policies included an exclusion for viral contamination or pandemic, and 98 percent of all policies had a requirement for physical loss. If insurance policies cover claims related to pandemics, insurance companies should pay those claims for the insurance contract.

However, it is not a good idea to apply coverage retroactively. That is why the NAIC issued a statement and submitted written testimony letting Congress know of our concern about requiring insurance companies to retroactively alter contracts to provide coverage that was not contemplated or funded and in many cases specifically excluded by the policy.

We believe altering these insurance contracts could jeopardize the financial health of insurance companies or affect their ability to pay other claims and ultimately impact the availability of needed coverages in the marketplace. This would undermine the ability of insurance regulators to protect consumers or ensure the solvency and stability of the insurance industry. As Congress considers what to do about the impact of this pandemic, future pandemics and the role insurance might play, the NAIC will remain actively involved in those discussions as a vital and objective resource.

COVID-19 International Impact 

The impact of COVID-19 has been truly global and so has our international engagement. In-person, international meetings have been suspended for the time being, but we have held regular calls to share experiences and dealing with the current situation and responded to a survey to collect informational jurisdictional responses.

Already this year, we've had virtual bilateral discussions with key markets like the EU and Bermuda, and we are nearing completion of months-long work on the latest IMF assessment of our system with a number of you. Our work on comparability between the insurance capital standard and the aggregation method has continued. However, the consultation on principles for assessment criteria will be delayed from July to later in 2020.

Turning to some of our financial priorities, work on the group capital calculation and the macro-prudential initiative remain important to ensure our system is prepared for the shocks and market disruptions of the future. COVID-19 provided a stark example of how financial markets can deteriorate, but also how quickly they can recover. Our system, which incentivizes a buy and hold approach to assets, is well suited to insurance liabilities. But we must not become complacent. Adding GCC and MPI tools to our tool belt is important for regulation here and to support our commitment to strong group supervision internationally.

In short, our approach has been both flexible and focused on dealing with the pandemic. As the pandemic continues to evolve, we will continue to take the actions needed to protect consumers and ensure the ongoing stability of the nation's insurance sector.


Because the forces of nature do not really care if we're in the middle of a pandemic, we have continued our efforts to make sure our consumers are prepared for any natural disaster. We are working with Congress, weighing in on proposals on the NFIP and expanding private flood options. The NFIP is set to expire in less than three months, but we cannot let that happen and will continue this critical work. The NAIC communications team, in conjunction with working groups, has produced materials on flooding, hurricanes, tornadoes and wildfires. In May, I was  interviewed by nearly 30 television and radio stations about natural disaster preparedness and resilience. I offered tips on how to prepare for hurricane season and reminded everyone about the importance of flood insurance. In June, the NAIC hosted a Twitter chat along with insurance departments across the country, FEMA and a number of other stakeholders, stressing the importance of preparedness. At the beginning of this year, I had two top priorities for my year as president. The first which we just discussed, was resiliency of consumers and their properties in the event of a natural disaster.


The second is long term care insurance. Both issues remain high priorities, even in the midst of COVID-19 and the quest for social justice. Long Term care insurance provides one of the most significant examples of tension between solvency, regulation and consumer protection.Elderly consumers are experiencing significant premium increases because carriers believe they are necessary to maintain reserves. Our long term care insurance task force continues its important work. They have been reviewing various approaches to address actuarially appropriate rate increases for long term care coverage. Last month, the Reduced Benefit Option Subgroup released a document for public comment that identifies benefit options that can be offered to consumers who cannot afford great increases. The principles were developed by 17 state departments of insurance and are designed to offer guidance on how to provide consumers with choices about changes to long term care contract benefits.

Addressing the many issues within this product line is still a priority for us. All the challenges we face in 2020 are new and ever-evolving. Our aim remains the same as they were almost one hundred and fifty years ago. Protect the consumers in each of our jurisdictions and ensure the safety and stability of the markets we oversee. We will make sure the citizens of our states and territories are treated equitably and without prejudice, and will keep pace with changing technologies and economic realities to ensure the insurance markets of the United States remain strong and vibrant and helping people manage the risk of everyday life for another 150 years and beyond.


In closing, 2020 is certainly not the year we expected, but it is the year that we've got. I could not be prouder to have the honor of serving this organization with my colleagues across the country. During these trying times, we have tirelessly worked to protect the lives and livelihoods of Americans and ensure that a vibrant insurance sector continues to be there for consumers when it's needed most. It has been said of the NAIC and its members, we are at our best when things are at their worst. That has never been truer. These days will pass and I look forward to when we can meet face to face again. Until then, I wish each of you and your families health, happiness and the hope of better days to come. Stay well and God bless. With that, I officially conclude the opening session of the 229th meeting of the National Association of Insurance Commissioners. Have a nice day.