Insurance regulators from Florida, South Carolina and Tennessee assert that they’re working well with innovators seeking to bring InsurTech into company operations and customer interactions.
“There are an exciting amount of entrepreneurs coming into this system with their thoughts and new programs,” Ray Farmer, director of the South Carolina Department of Insurance, said during a panel discussion on Oct. 29 at the 2018 PCI Annual Meeting in Miami.
Farmer said that when he meets with a company or entrepreneur that has developed a new product, it is up to his office “to try to weave that into our system.”
“We don’t see the need of a regulatory sandbox at this point,” Farmer said. “We have enough flexibility, we have enough discretion and have a number of new concepts that come in [and] didn’t get tripped up on regulatory inflexibility.”
Farmer noted that the National Association of Insurance Commissioners has sponsored two events in Silicon Valley over the last two years where “lots of discussion” and healthy dialogue about InsurTech advances has been part of the discussion.
Panelist Julie Mix McPeak, commissioner of the Tennessee Department of Commerce and Insurance and the NAIC president, said she has been “meeting with innovators early on to discuss ideas they may have about how they fit into the system.” She added that NAIC is trying to facilitate easier communications for both entrepreneurs and carriers seeking to add innovative technology to their system.
“We have compiled [at NAIC] a state contact for innovation in all of the states so entrepreneurs or carriers can go to a person and say, ‘This is what we are contemplating,” McPeak said.
Panelist David Altmaier, insurance commissioner for the Florida Office of Insurance Regulation, said his office sent a delegation to Silicon Valley to meet with principal investors and others in the InsurTech space to try to bring his office up to speed.
“It helps us a lot,” Altmaier said. “There is a balance of trying to make sure consumers have access to products that meet their risk profile [while] at the same time making sure products coming into the marketplace are sound and going to be there in the long run.”
Altmaier said he doesn’t expect the state legislature to give him the ability to waive laws to incorporate innovation into the insurance system. McPeak, on the other hand, said she and the NAIC have asked businesses and carriers if statutes are making InsurTech advances and innovation challenging.
“We have asked if statutes are problematic,” she said.
The panel also sounded off on topics including autonomous vehicles, risk-based pricing, the industry’s financial strength and flood insurance. Here are some highlights of those comments:
Farmer noted that the U.S. Department of Transportation and other federal agencies issued some guidelines on how autonomous vehicles will be treated. Among the most significant for state insurance regulators: Liability and other issues will be left up to the states.
“We’ll still be insurance regulators,” Farmer said, adding that the regulatory process will likely take several years to fully hash out.
McPeak said she sees regulatory issues regarding autonomous vehicles as “a work in progress, and we are going to have a number of insurance issues that we are going to have to address.”
Altmaier said he was concerned about some issues, such as where fault lies when an autonomous vehicle crashes—with the technology or the driver.
There is a worry about the “litigation hell that could come up from an insurance standpoint,” Altmaier said. “As an industry we ought to think through that kind of thing.”
Risk-Based Pricing and Predictive Modeling
McPeak said regulators want companies to be able to use predictive modeling, though there are concerns.
“If we’re getting down to an individual who is priced differently than another person with insurance, we’re getting down to a delicate balance between having all share the load of insurance,” she said.
Altmaier said that risk-based pricing “has got to be risk-based,” though he questions data that have become part of this process such as marital status. He added that risk-based pricing must remain affordable.
Such products he said, must remain “available, reliable and affordable.”
Altmaier said that affordable reinsurance has helped keep carriers relatively stable, even with the slew of catastrophes that have hit over the last year.
Farmer said financial stability in his state has come, in part, through competition.
“Competition is alive and well,” Farmer said. “We’ve added an additional 80 companies to write property insurance in South Carolina. Competition has done a great [job] regulating rates.”
Panelists’ comments on flood insurance can be accessed here.