States Moving ‘Aggressively’ on Regs: Expert Says

The Trump administration is hollowing out regulations to the benefit of industries across the board, delivering on a central campaign theme.

When it comes to insurance, however, there is only so much that Washington officials can do. State insurance commissioners continue to wield the most regulatory power, and are expected to act “aggressively” in 2018, said Howard Mills, global insurance regulatory leader for Deloitte.

“The state insurance regulatory structure is back to being largely the only game in town and they’re moving ahead pretty aggressively on everything, whether it’s cybersecurity, consumer protection, use of big data,” Mills said. “They’re very, very vigorously moving ahead.”

The main issue on the table is extension of the fiduciary standard. Trump’s team managed to delay the most punitive aspects of the Obama-era Department of Labor fiduciary rule until July 1, 2019. In the interim, analysts expect the DOL to weaken the rule significantly .

But it might not matter if states continue to push fiduciary standards of their own. In fact, it might make it worse.

“You know, best-interest standards for consumers is, politically, a very powerful message for a state legislature to be saying, ‘Hey, you know, we’re really looking out for the consumer,’” Mills said. “So I think there’s almost a bit of a competition between the regulators and the legislators.”

New York Joins Fray

Last week, New York Gov. Andrew Cuomo announced a "best-interest" standard for anyone selling life insurance and annuity products in the state. The proposal would cover "all sales of life insurance and annuity products, beyond the types of advice covered by the DOL rule," Cuomo said.

The proposed amendments are subject to a 60-day notice and public comment period. If adopted, New York would become the second state to pass its own best-interest standard. Nevada passed a law that Gov. Brian Sandoval signed in June.

Both states cited the lengthy delays of the DOL rule.

Products with more complex modeling are sure to attract the attention of state regulators, Mills said.

“I think they’re going to get much more granular on what is a suitable sales practice, on insurers acting in the best interests of their consumers, particularly around products like variable annuities, long-tail products,” he said. “I think that’s going to be clearly a very strong focus going forward.”

While the sales standards get all the attention, simply because companies and agents could get sued, it is hardly the only regulatory issue states are eyeing, Mills said.

'They're Worried About the Impacts'

Cybersecurity and big data are areas crying out for some regulatory oversight.

“We are getting to the point where technology and predictive analytics make the underwriting process ever, ever more precise, so they’re worried about the impacts on consumers,” Mills said. “And they’re worried about the types of data that are used.”

Likewise, Mills expects more market conduct exams as they are a good pro-consumer activity.

“State regulators certainly are not going to do anything to roll back anything that has the appearance of being a pro-consumer initiative, so there will be a lot of the focus on consumer protection,” he added.

InsuranceNewsNet Senior Editor John Hilton has covered business and other beats in more than 20 years of daily journalism. John may be reached at john.hilton@innfeedback.com. Follow him on Twitter @INNJohnH.

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