NAIC update: Winter 2017

Highlights from December meeting of insurance commissioners

The National Association of Insurance Commissioners (NAIC) 2017 Fall National Meeting reflected on the accomplishments of the last year and focused on future regulatory challenges in the areas of consumer data, long-term care, annuities, health care, and more.

NAIC meeting update

A ray of optimism broke through the storm clouds and nuclear warning sirens at the 2017 fall meeting of the National Association of Insurance Commissioners (NAIC) held in Honolulu, Hawaii.

Commissioners took the opportunity to reflect on their accomplishments of the past year and appreciate the current strong standing of state insurance regulation. Adding to the merriment, the US Department of Treasury released its latest report, which reaffirmed the primacy of state insurance regulation.

Among the organization’s signature accomplishments during NAIC President and Wisconsin Insurance Commissioner Ted Nickel’s year as president was the adoption of the Insurance Data Security Model Act, a framework for cybersecurity for regulated entities. This was one of a number of NAIC initiatives designed to position regulators to properly integrate and supervise the new technologies commonly grouped together as insurtech and regtech.

Nickel and the NAIC looked to the future as well, addressing other key challenges ahead, including potential changes to Actuarial Guideline 43 affecting variable annuities and new sales standards for all annuities, funding sources for guaranty funds and the ongoing concern for the long-term care insurance segment, and regulatory oversight of insurers’ use of consumer data.

Collaboration with international regulators also moved forward, as the new International Association of Insurance Supervisors (IAIS) Secretary-General Jonathan Dixon addressed various committee meetings and NAIC commissioners explained the impact of recently agreed to Insurance Capital Standard (ICS) processes.

Annuities recommendations exposed for discussion

The Variable Annuities Working Group faced some resistance in its meeting on suggested changes to Actuarial Guideline XLIII—CARVM for Variable Annuities (AG43) and to life risk-based capital (RBC C3 Phase II) that could have a significant impact on sellers of variable annuities. Even before the presentation, some stakeholders expressed concern about the difficulty of providing input on this topic and asked that the proposal not be considered final, but rather just a beginning, with a longer-than-usual exposure period to April 30, 2018. Given the desire to have a finished product by the summer 2018 national meeting, the recommendation document was exposed for comment until March 2, 2018. An all-day meeting of the working group was set for the spring meeting where comments will be discussed.

Professional giving speech at NAIC
Picture courtesy of the NAIC

Big data regulatory framework in the works

Regulatory oversight of insurers’ use of consumer data was a top issue at the meeting of the Big Data Working Group. While no comments have been received on the proposed framework for regulation, certain items had just been added to the agenda, so the document was left open for comments until January 12, 2018. Meeting attendees also discussed a variety of issues that fall within the working group’s purview (and a few that don’t), including the use of third-party vendors in underwriting, the algorithm bases for claims and price optimization, and data portability. The working group also heard a report on the progress on the NAIC’s efforts to review complex models.

Picture courtesy of the NAIC

Best interest standard moves a step closer

A draft of proposed revisions to the Suitability in Annuity Transactions Model Regulation (#275) took center stage at the meeting of the Annuity Suitability Working Group. There seemed to be some consensus among industry and regulators on a new best interest standard for annuity sales, however, concerns were expressed by some, including producer representatives. New standards would include broad compensation disclosure and record retention mandates, with all involved working in the best interest of the consumer. The comment period ended January 22, 2018. The working group plans to reconvene, review comments received, and vote. The goal is to have a recommendation for the Life Insurance and Annuities Committee at the NAIC’s spring meeting.

Picture courtesy of the NAIC

Health care sessions focus on the impact of the regulatory changes

While repeal, replace, or repair of the Affordable Care Act (ACA) has not come to fruition, the Health Insurance and Managed Care Committee and its task forces and workgroups continued its focus on the impact of the regulatory changes at the federal and state levels, as well as on consumers. Getting educated is part of that process and NAIC staff will continue to work on developing a “pharmacy 101” so that state insurance regulators’ understand the pharmaceutical industry—manufacturing, prescription drug benefit management, and the role of pharmaceutical benefit managers. As the ACA changes continue to be unsettled, the NAIC will need to continue to monitor the situation and help states respond.

Read the complete NAIC winter update

These are just some of the issues and accomplishments from the NAIC fall meeting. Read Deloitte’s comprehensive meeting update, which also includes a detailed summary of the accounting and reporting changes discussed, adopted, and exposed during the fall meeting and interim conference calls. The association’s leaders and members will continue their forward path at the next national meeting in Milwaukee, WI this coming March.

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NAIC update collection

Missed the discussions and outcomes from the NAIC Fall 2017 National Meeting in Honolulu? Explore Deloitte’s collection of NAIC meeting updates.

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