Consumer Reps: Insurers Use ‘Bad Faith’ On Underwriting Definitions

Several consumer groups are accusing life insurers of obstructing an effort by state insurance regulators to establish guidelines for accelerated underwriting.

The National Association of Insurance Commissioners' working groups are charged with establishing the "data elements" and "definitions" to be used in accelerated underwriting.

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 this week.

These data sources include consumer credit data, social media, facial analytics and more, said Birny Birnbaum, director of CEJ.

"While accelerated underwriting holds the promise of faster decision making and broader access, the use of black-box algorithms with little or no regulatory oversight also raises the potential for unfair and unfairly discriminatory treatment of applicants and policyholders," Birnbaum wrote.

Experts Weigh In

Work on the data elements and definitions progressed in late 2020 within a Market Conduct Annual Statement working group. The MCAS was developed in the 2002 to provide regulators with a uniform system of collecting market-related information to help states monitor the market conduct of companies.

MCAS created a "subject matter expert" drafting group to work through the data and provide recommendations. As the SME group met, Birnbaum claimed that representatives for the American Council of Life Insurers sought to "obstruct" their work by offering unserious proposals.

Still, the SME group completed a draft proposal definition of accelerated underwriting for MCAS reporting. The MCAS working group had intended to adopt data elements and a definition by a June 1 deadline.

That changed last week when the NAIC announced that it would not meet the deadline and accelerated underwriting reporting would be delayed by another year.

Birnbaum claimed the ACLI, unable to stymie the subject matter experts, went to a different group, the Accelerated Underwriting Working Group, and got them involved in order to slow down the process.

ACLI spokesman Whit Cornman said the process should not be rushed.

“After extensive consultation with multiple stakeholders representing the industry and consumer groups, the Accelerated Underwriting Working Group determined it needed more time to develop a definition of accelerated underwriting for market conduct reporting purposes," he said via email. "This is a complicated issue and it’s important that the working group and NAIC get the definition right. We look forward to continuing to engage with the working group as it moves forward with an open and transparent process.”

'Particularly Unsettling'

Following the Tuesday postponement of accelerated underwriting reporting for another year, various consumer reps weighed in as a letter-writing campaign flooded NAIC inboxes.

"The abrogation of process for amending the MCAS undermines the integrity of the NAIC and its important role as an honest broker valuing the input and interests of both industry and consumers in a transparent, evidence-based decision making process," wrote Kenneth Klein, an unfunded consumer representative to the NAIC.

"To do so on such a profoundly important matter as insurers’ use of big data and AI is particularly unsettling, and antithetical to the NAIC and its mission as a leader in developing sound public policy."

The consumer reps are asking that the original timeline be restored and the subject matter expert group draft proposal be voted on by the June 1 deadline.

NAIC officials in charge of those groups could not be reached for comment.

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.

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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.