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NAIC update: Fall 2022 National Meeting

On turning tides and charting new courses

The National Association of Insurance Commissioners (NAIC) hosted its Fall 2022 National meeting in Tampa, Florida, December 12–16, 2022. Important topics included financial inclusion, life insurance investment portfolio risk, consumer protections, potential algorithm biases from artificial intelligence and machine learning, and adherence to global capital standards.

Planning ahead

Right off the bat, this meeting marked the last for NAIC President and Idaho Insurance Director Dean Cameron, as well as the official election for Missouri Insurance Director Chlora Lindley-Myers. Lindley-Myers noted that she plans for the upcoming year to be full of effective deliverables and efficient timelines and that “improving our industry, enriching the lives of our consumers, and maintaining our state-based system” is a priority.

Discussions around the 2023 budget also touched on the NAIC’s new proposed strategic plan, State Connected, which aims to protect consumers by educating them on industry standards and risk management tools so that they can make more informed decisions. Additionally, the NAIC is pivoting its focus toward addressing the impact AI may have on consumers, particularly considering how the use of algorithms for assessing underwriting and claims is becoming increasingly popular across operations.

Ongoing conversations

When considering privacy concerns, the NAIC Privacy Protections Working Group is actively building a reference document to keep an open line of communication regarding different privacy model acts. Specifically, the new Privacy Protections Model Act reference paper can be used to support state insurance departments as they discuss data collection, data ownership, and disclosure of information in insurance transactions within their own respective legislatures.

On a similar note, more expansive uses for data have raised concerns regarding data transparency and accessibility. With AI becoming such a popular tool across the industry, it has become clear that a regulatory framework will need to be built and adopted to effectively manage both data inputs and resulting outcomes. Specifically, there are concerns around regulation, third-party development of AI models, potentially biased algorithms, and outputs that don’t truly reflect consumer expectations.

Equity in the industry was top of mind as well. The Special Committee on Race and Insurance, the NAIC’s coordinating body on identifying issues regarding race and DEI within the insurance sector, will continue to research and analyze insurance, legal, and regulatory approaches to addressing different forms of discrimination, disparate treatment, and the subsequent impacts.

In terms of capital, the NAIC will not be pausing efforts to include collateralized loan obligations as a financial modeled security and instead will potentially turn to risk-based capital methodology to analyze structured assets. In a Capital Markets Special Report, the NAIC also added that “the consequences of less stringent underwriting on the underlying bank loan collateral will result in substantially lower recovery rates during the next recession.”

When considering other points of interest and potential risks within the industry, the topic of wildfires emerged, with specific discussion around Colorado’s consideration of a Fair Access to Insurance Requirements (FAIR) Plan. Rather than take a reactive approach, other state insurance departments have previously encouraged regulations that incentivize disaster preparedness and mitigation. These examples—whether they’re referring to fires, floods, or something else—can help insurance agents across the country plan a more effective road map moving forward.

Moving forward

Learn more about the course the NAIC has charted for the industry—and what the impact of that might look like for your business—in this event overview report. Plus, explore topics of interest from past events thanks to the NAIC Updates Collection.

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