The insurance industry is undergoing a period of rapid change on a number of fronts, as outlined in a report by the Deloitte Center for Regulatory Strategy Americas titled, “Navigating the year ahead. Insurance regulatory outlook 2017.” Here are several highlights from the report on the outlook for insurance regulatory trends this year.
Multiple regulatory influences. Traditionally insurance has been regulated at the state level, with coordination by the National Association of Insurance Commissioners (“NAIC”). Over the years, the federal government has chomped at the bit to gain a regulatory upper hand. All of that may well slow down with the incoming Trump Administration, which appears to support transferring power and authority away from the federal government and back to the states.
Own Risk Solvency Assessment (ORSA). The Risk Management and Own Risk and Solvency Assessment Model Act (RMORSA) took effect on January 1, 2015, and implementation timelines have varied across states. Many carriers have filed their first-year filing by now, and will be assessing risk and capital requirements on a continuing trend line.
Cyber technology. Cybersecurity, big data, and privacy are significant evolving issues in the rapidly evolving field of cyber technology. Insurers are using new technologies to assess claims data, interact with customers in real time, and develop cyber products for corporate clients.
Acquisitions. Deloitte predicts that both domestic and international acquisitions, as well as industry consolidation, will continue in the future
Corporate governance. The Corporate Governance Annual Disclosure Model Act and supporting Model Regulation adopted by the NAIC in 2014 has since been enacted in five states. The Act is designed to provide regulators with more information on the corporate governance practices of insurers. More states are expected to adopt the Act in the future.
Regulatory response to digital technology. Rideshare services like Uber and Lyft, autonomous vehicle technology, and smart home software are a few of the many forces behind changes to auto, homeowner, and product liability coverage. The insurance industry will continue to respond with adaptive changes to lines of coverage and associated regulatory requirements.
Longevity risk charge. Increased life expectancy is a leading risk factor affecting the life insurance sector of the overall insurance industry. Other societal and economic trends include rising health care costs, the low interest rate environment, an aging population of Baby Boomers, and a move away from defined benefit pension plans to defined contribution plans. All these factors influence potential changes in industry assumptions and risk calculations. The NAIC is studying these longevity risks.
Long-term care. Challenges in the long-term care (“LTC”) market include older products with limited pricing flexibility, the number of LTC carriers in a run-off or receivership position, and the status of some guaranty funds.
Form F risk reporting. The NAIC Form F relates to enterprise risk reporting. A recent industry survey by the NAIC indicates that regulators view this reporting process as being less effective than desired. As a result, the NAIC is creating further guidance for reporting entities.
Group regulatory capital initiatives. Regulations regarding required capital, eligible capital, and valuations methods are being considered at an international level. U.S. and state regulators are also looking at capital requirements.
Bill Hager’s Experience as an Insurance Expert
Mr. Hager has extensive and substantive experience relating directly to wide range of insurance policies, including interpreting policy language and determining the insurer’s obligations under such policies. He served as a regulator for eight years in five positions:
- Commissioner of Insurance (Iowa);
- First Deputy Commissioner of Insurance;
- Member of the National Association of Insurance Commissioners (NAIC);
- Administrative Law Judge f/k/a Hearing Officer at the Department of Insurance (IA); and
- Assistant Attorney General assigned on a full-time basis to the Department of Insurance.
In these positions, Mr. Hager, along with his staff, approved (or disapproved) of the language of insurance policies used by each of the insurance companies doing business in the state of Iowa. This regulatory action also included the approval of policy application forms. In addition, he regularly served as an Administrative Law Judge (then known as a “Hearing Officer”) in matters relating directly to insurance policies.
While Commissioner, Mr. Hager also served as a member of the National Association of Insurance Commissioners (“NAIC”) and participated as a member of its Executive Committee.
In addition, Hager has served in the following capacities:
- President and Chief Executive Officer of NCCI, a major property casualty insurance entity;
- Elected Member of the Florida House of Representatives with service on the Insurance Committees;
- General Counsel and Chief Lobbyist to the American Academy of Actuaries;
- Attorney in private practice;
Click on the link to read more about Mr. Hager’s insurance expertise.
Material for this article was taken from a collection of industry sources relating to the subject.
In all of the general statements here, see the state law of the controlling jurisdiction. Every case is different and circumstances vary widely depending on the governing state law, policy provisions, and related considerations.
This blog is provided for educational purposes only. It is not intended to provide legal advice or an opinion in regard to any topic discussed. The blog should not be used as a substitute for legal advice from a licensed attorney in your state.