United States: The Future Of Insurance Regulation In A Time Of Technological Change: A Perspective From The NAIC's Spring Meeting 2019

Last Updated: April 29 2019
Article by Cooley LLP

A key part of the counsel we provide to our insurtech clients is assisting them in navigating the insurance regulatory landscape, with 50 separate state-based legal systems regulating the insurance industry. While having to comply with 50 separate laws every time you make a business decision can appear to be an impossible task, state regulators have worked hard to standardize their laws through the National Association of Insurance Commissioners, a regulatory-support organization composed of the insurance departments in all 50 states tasked with developing model insurance laws and regulations to be adopted and implemented at the state level.

The NAIC holds a national meeting three times each year, and the impact new and innovative technologies would have on the insurance industry was a major topic at this year's Spring Meeting in Orlando. From blockchains to autonomous vehicles, new technology has the potential to upend the traditional insurance industry, and regulators were grappling with how to adapt their laws and regulations to this changing technological landscape. Below is a summary of some of the major tech-related topics that were discussed and what we believe their regulatory impact on the insurance industry, and those working hard to bring disruptive technology to the industry, will be.

A. Insurance Underwriting and Big Data

Many of our clients have developed new and innovative proprietary data models that harness an expanding array of data to underwrite risk in a more efficient and cost-effective manner. Using new data models, life insurance companies are now able to offer "accelerated life underwriting" whereby life insurance policies are issued without the need for a traditional medical exam. Property and casualty insurers are able to utilize smart home or smart car sensors to offer lower premiums to policyholders who engage in risk-mitigating behavior. However, in the insurance industry it is not enough to simply have the best and most accurate predictive data models. Those models need to be reviewed and approved by regulators before the company can rely on them to set insurance rates and premiums.

Any data models used by an insurance company to determine premiums must be approved by regulators as part of the company's rate filings, and the NAIC's Big Data Working Group is currently reviewing the regulatory framework governing this rate-filing process. As part of this review, the Big Data Working Group has partnered with the Casualty Actuarial and Statistical Task Force to develop a Predictive Models White Paper that lays out the best practices for reviewing an insurance company's generalized linear predictive models that are filed to justify rates for home and auto insurance. These best practices include a long list of information that any insurance company may proactively provide to regulators as part of the rate-filing process, including the geographical scope of the data, data sources, reliance on sub-models, data-scrubbing practices and the software used to develop the data models.

The task force submitted a draft of this white paper for public comment on October 25, 2018 and received a number of comments from stakeholders, many of whom found the best practices to be too burdensome and overreaching. Other stakeholders emphasized that regulators needed to ensure the safeguards were in place to protect the confidentiality of any proprietary data models. The task force is currently working to incorporate these comments into their draft and will release a revised draft for further comment. Although this white paper is focused on a narrow range of data models and is still a work in progress, it does provide a decent roadmap for companies to follow as they engage with regulators and provide them the information they need in order to review and approve their data models. Hopefully, this white paper and the other technical support the Big Data Working Group is working to provide to regulators will lead to a more transparent, streamlined rate review process that will enable companies harnessing data through innovative technology to have their data models approved in a more expedited fashion while ensuring that consumers are adequately protected.

B. Chatbots and AI in the Sale and Solicitation of Insurance

Our insurtech clients are often looking to disrupt the traditional insurance distribution model whereby insurance companies sell policies to their customers through insurance agents or brokers acting as middlemen. Many insurtechs believe they can utilize chatbot and artificial intelligence technology to sell insurance directly to customers, without the need for, and cost of, a human insurance agent. These insurance "robo-advisors" are a good example of where the insurance regulations have not really kept up-to-date with the rapid, technological changes in the industry. Insurance agents and brokers are still licensed and regulated as individuals or as entities even though a consumer can now buy a policy through a robo-advisor without ever having to interact with an actual, licensed person.

In order to address this regulatory gap, the NAIC's Producer Licensing Task Force announced during the Spring Meeting that they would develop a white paper looking into the "role of chatbots and artificial intelligence in the distribution of insurance and the regulatory supervision of these technologies." We would anticipate that this white paper could lead to increased regulation down the road concerning how licensed insurance agents and brokers use chatbots and artificial intelligence to sell, solicit and negotiate insurance.

C. Insurtechs and the Future of Anti-Rebating Laws

Under the insurance laws of most states (with the exception of a few states such as California), insurance companies and agencies are prohibited from offering rebates (i.e., discounts on premiums in order to induce a potential customer into buying a policy). While the anti-rebating laws are ostensibly designed to protect consumers, in practice they can often have an anti-consumer effect by prohibiting consumers from receiving discounts on their premiums that they would otherwise receive and by making it harder for innovative insurance-related companies to engage in rewards programs whereby customers receive premium discounts or other rewards for engaging in risk-mitigating behavior.

The NAIC's Innovation and Technology Task Force recently identified these anti-rebating provisions as a possible barrier to innovation and is currently re-examining whether they are still needed. At the Spring Meeting, the task force announced they would hold a meeting at the NAIC/NIPR Insurance Summit in Kansas City, MO on June 4 to hear presentations from regulators and interested parties and discuss whether these anti-rebating laws could be repealed. We hope that these discussions will lead to the task force developing a model law or regulation to repeal or revise these somewhat archaic laws, and we believe this reform would be to the benefit of both the insurance industry and their consumers.

D. Conclusion

Throughout the Spring Meeting, regulators consistently expressed a readiness to work with and listen to insurtech stakeholders as the regulators look to develop new laws and regulations to adapt to the changing technological landscape in the insurance industry. If any company is looking to do something new and innovative in the insurance industry that would require regulatory approval, we always recommend engaging with regulators early and often. Obtaining regulatory buy-in at an early stage is often critical for ensuring a relatively fast and painless regulatory approval process and can significantly increase a company's speed to market. Regulators sound ready and willing to have a dialogue with the industry on the future of insurance regulation, and companies looking to disrupt the insurance industry should consider taking them up on their offer.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Similar Articles
Relevancy Powered by MondaqAI
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions