Reporting data on accelerated underwriting to regulators would seem to be a noncontroversial idea.
Alas, all is not as it seems. All parties must agree to define “accelerated underwriting” before any data can be collected.
A National Association of Insurance Commissioners’ working group was unable to do that after weeks of meetings and discussion. Instead, the group delayed defining accelerated underwriting and related data elements for another year.
And that means accelerated underwriting data collection will be pushed back one year to 2024.
Regulators claimed they were being rushed to meet a June 1 deadline to complete the work.
“We need to be really clear and have a better idea of what exactly we’re looking at,” said Paul Hanson, chief examiner, market conduct exams, Minnesota Department of Commerce. “And while it may take another year, that’s regrettable. But on the other hand, it’s better to have a good handle on it rather than just a race forward.”
Consumer advocates were disappointed by the delay and fought it until the final meeting.
“Many months and hundreds of hours of work went for naught,” said Birny Birnbaum, director of the Center for Economic Justice. “With this non-action by the regulators, insurers remain unaccountable and consumers remain vulnerable to insurers’ use of big data, artificial intelligence and black box algorithms in auto and home insurance claims settlement and life insurance underwriting.”
The Market Conduct Annual Statement working group set a June 1 deadline to finalize its definitions and data elements in order to complete the entire process in time for 2022 data collection on accelerated underwriting for reporting in 2023.
A Uniform System
Created in 2002, the MCAS provides regulators with a uniform system of collecting market-related information to help states monitor the market conduct of companies. New areas of information collection are periodically added to the MCAS.
The problems with the accelerated underwriting effort arose in May when the NAIC announced that the working group would not be able to complete its work by June 1. After consumer reps criticized the delay, the MCAS subject matter experts reversed course and agreed on a definition, briefly putting the process back on track.
The subject matter expert group sent this definition to the MCAS Blanks Working Group:
Accelerated Underwriting: For purposes of MCAS reporting, accelerated underwriting means applying predictive modeling in the underwriting or pricing of life insurance using (in whole or in part) non-medical data obtained other than consciously provided by the applicant or policyholder.
But Rebecca Rebholz, chair of the MCAS Blanks group, noted that the subject matter expert group was far from a consensus on the language.
“Our subject matter expert group did not contain enough regulators to really have a full discussion from the regulator perspective,” she said. “I brought it forward simply because we were at an impasse in the subject matter expert group. And we had reached the end of our time.”
Accelerated underwriting, also called “express underwriting,” is making it faster and easier for people with good health and good credit to obtain life insurance. With it, consumers can get a fully underwritten, regularly priced term life insurance policy of up to several million dollars without a medical exam.
Insurers are excited about the speedy underwriting capabilities, which were boosted by the pandemic, since many consumers view the doctor’s exam as a major barrier to purchasing life insurance.
However, the data usage is coming under scrutiny by consumer groups and state regulators. States such as Colorado are considering proposals to limit the use of big data.
Questionable Data Use
Consumer representatives are most concerned about questionable data sources that fall outside “the disclosure and consumer protection provisions of the Fair Credit Reporting Act,” as the Center for Economic Justice wrote in a letter to the NAIC.
These data sources include consumer credit data, social media, facial analytics and more, Birnbaum said.
Some regulators on a late May call questioned why the accelerated underwriting definition was not more specific on data sets that can be misused. Birnbaum, who was a member of the SME group, said the definition is intentionally narrow.
“If you open it up to accelerated underwriting means any type of data used, then everything would be recorded as accelerated underwriting,” he explained. “And there would be virtually nothing that can be recorded other than accelerated underwriting.”
The American Council of Life Insurers opposed the definition and endorsed allowing another working group, the Accelerated Underwriting Working Group, to do the work. A spokesman for the trade association said the delay is the best course of action.
“The purpose of MCAS is for regulators to gather data that will help protect consumers. Gathering data based on a definition that is incomplete will not help the regulatory community fulfill this mission,” said Whit Cornman, director of media relations for ACLI. “It’s important that the working group allows time for sufficient stakeholder input on the definition of accelerated underwriting and meaningful coordination among the various NAIC workstreams examining this important issue.”