NAIC working group adopts long-awaited accelerated underwriting guidance

Image shows the words "Accelerated Underwriting" — An NAIC working group completed an accelerated underwriting guidance five years after it was created to do so.

By John Hilton

It took years for a regulator group to finalize an accelerated underwriting guidance that was adopted in five minutes Tuesday with no comments.

The Accelerated Underwriting Working Group met its goal to adopt the guidance in time for its parent Life Insurance and Annuities Committee to consider during the National Association of Insurance Commissioners' summer meeting next week in Chicago.

The guidance is divided into three areas of focus: A) regulatory considerations; B) strategies for review; and C) requests for information. The law firm Locke Lord noted that the guidance document "does NOT provide guidance to insurance carriers but rather suggestions to insurance regulators when reviewing life insurance carriers’ use of accelerated underwriting."

The guidance is closely aligned with the NAIC AI Model Bulletin adopted late in 2023, the law firm added. In particular, on an emphasis on outcomes that are not “unfairly discriminatory”; a required mechanism for consumers to challenge data points and to correct mistakes if confirmed; and required procedures for validating, testing, and/or auditing data sets, including those provided by third-party vendors.

Consumer concerns

A second, two-week public comment period ended July 26 with the AU working group receiving one letter. Five consumer advocates signed the letter urging regulators to be more specific in addressing accelerated underwriting's potential for consumer harm.

"We again stress the urgency of moving from high-level principles and guidelines to recommending and implementing substantive consumer protection requirements," the letter reads. "Until that is accomplished – or at least begun – the goals of ensuring fair, transparent, safe, and secure AUW programs (and AI programs generally) remain unfulfilled and insurance consumers largely unprotected."

During a July meeting following the first public comment period, some consumer advocates were more vocal about their concerns.

Data points pulled from random sources can often reach very inaccurate conclusions, noted Brendan M. Bridgeland, director of the Center for Insurance Research. He gave the example of smoking and weight and the general conclusion that people who smoke don't eat as much.

"You wound up with a situation where because of these multiple data points coming in, and not being clear how they function together, where people had been overcharged on mortality for many years for their weight, on the assumption that everybody who was on the thinner side, leaner side was also a smoker," Bridgeland said.

The need for speed

Accelerated underwriting is now a full 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.

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.”

Work was set aside for about a year while other projects advanced. The working group returned to the accelerated underwriting issue in February.

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.