Advocate concerned that NAIC accelerated underwriting effort lacks teeth

The life insurance industry has long worked to achieve accelerated underwriting.

By John Hilton

After putting accelerated underwriting aside for a year, state insurance regulators are out with tentative guidance on the topic.

But one longtime consumer advocate wonders what took so long. Birny Birnbaum, executive director of the Center for Economic Justice, noted that regulators have studied accelerated underwriting for at least eight years.

“That seems like a long time to get to a point where it’s just a ‘first step,’” he said, echoing how regulators described the guidance.

Birnbaum, a longtime former consumer liaison for the National Association of Insurance Commissioners, made his comments Thursday during a call by the Accelerated Underwriting Working Group.

He asked several questions about how the guidance treats the “proper use of data elements” to avoid proxy discrimination.

“I think what's been made clear in this regulatory guidance, and then also in the other, corresponding NAIC work, is that current insurance law, as it relates to things that result in rates or underwriting that's been fairly discriminatory, that would still be applicable,” said Sarah Gillaspey, senior associate counsel for the Minnesota Department of Commerce.

Birnbaum agreed to put his questions in writing so the entire working group can respond. The working group exposed the guidance for comments through June 30.

Three areas of underwriting focus

Regulators are exposing a 42-page guidance document that includes background on how the accelerated underwriting issue evolved. It refrains from specific regulation and is divided into three areas of focus: A) regulatory considerations; B) strategies for review; and C) requests for information.

"Ensuring that insurers use accelerated underwriting in a transparent manner is important because consumers should understand what personal data is being accessed by insurers and how that data is being used," the guidance reads. "Insurers accessing sensitive consumer data have a duty to secure that data to protect consumers from the harm of unauthorized disclosure."

“We took the approach that this guidance, like the AI bulletin, wouldn't be prescriptive,” said Lauren Van Buren, chief legal counsel for the Wisconsin Office of the Insurance Commissioner. “I think all states have a prohibition on unfair discrimination and we would give states discretion to interpret that within their own laws and policy decisions.”

The NAIC adopted the Model Bulletin on the Use of Algorithms, Predictive Models, and Artificial Intelligence Systems by Insurers during the association's December meeting.

Overlapping work

Created during the NAIC's 2019 summer meeting, the Accelerated Underwriting Working Group began work with several charges.

Among them, to "consider the use of external data and data analytics in accelerated life underwriting, including consideration of the ongoing work of the Life Actuarial (A) Task Force on the issue and, if appropriate, drafting guidance for the states.”

Accelerated underwriting is more than a decade old with the earliest programs having been brought to market in 2012. Still, the idea remained more fantasy than reality for many years. Then the COVID-19 pandemic hit.

AUW face amounts rapidly increased during the onset of COVID-19 in order to meet the demand for socially distant underwriting options. Those options remained in place and even continued to grow, post-pandemic, Munich Re found in a 2022 survey of life insurers.

The accelerated underwriting group also produced a draft Referral to the Market Conduct Examination Guidelines Working Group. The two drafts were initially exposed for comment in February 2023. Then the AUWG paused its work pending completion of two projects under the Innovation, Cybersecurity and Innovation Committee, one being the AI bulletin.

The second project included a survey on the use of artificial intelligence-machine learning in life insurance under the Big Data and AI Working Group. Fifty-eight percent of life insurers are either using or have an interest in using artificial intelligence in their businesses, the survey found.

InsuranceNewsNet Senior Editor John Hilton covered business and other beats in more than 20 years of daily journalism. John may be reached at [email protected]. Follow him on Twitter @INNJohnH.

InsuranceNewsNet Senior Editor John Hilton has covered business and other beats in more than 20 years of daily journalism. John may be reached at [email protected]. Follow him on Twitter @INNJohnH.