The business and regulatory environment for insurance is constantly changing, and part of our client service platform involves staying on top of those changes. One way we do this is by attending the periodic meetings of the industry-regulator-consumer liaison committees sponsored by the Wisconsin Office of the Commissioner of Insurance (OCI) for life, health, and property and casualty insurance. The following is our report on the discussion from the most recent meeting of the Property and Casualty Insurance Advisory Council.
Rick Parks served as chair of the meeting, and welcomed Kellye Golden, Director of Operations at Wisconsin Mutual Insurance Company, as a new member of the Council.
National Association of Insurance Commissioners (NAIC)
Cybersecurity. Jennifer Stegall, an OCI Policy Advisor, reported that the NAIC Cybersecurity Task Force's fifth draft of an Insurance Data Security model law was proposed heading into the NAIC’s August meeting. Response to the fifth draft was significant, and due to the amount of negative feedback, a sixth draft was released at the August meeting. The features of the sixth draft discussed were:
- In an effort to provide uniformity between states, the draft stated that compliance with New York State’s regulation would constitute compliance for purposes of the model law.
- In an effort to make compliance less onerous to insurers, the requirement in previous drafts that insurers report their compliance annually was replaced with an annual certification of compliance.
- The sixth draft still requires notice to the Commissioner within 72 hours of a cybersecurity incident, but this 72 hour report is not necessarily expected to be complete. In response to a question, it was noted that confidentiality of such initial reports would likely be subject to a balancing test.
It was also noted in response to questions that the model law may move to an accreditation model at some point in the future, but there are no such plans at present. In response to another question, it was noted that the model law does take into account the size of an entity when determining requirements.
Big Data. OCI's market regulation bureau Director Rebecca Rebholz noted that one charge of the Big Data Working Group is to look at ways to help states review complex rate filings. For example, some rate filings may reach in excess of 2 million pages, with states having no way to review them effectively. Accordingly, the Big Data Working Group has been considering a proposal released this summer for the NAIC to create an actuarial working group that would be available to assist with states’ reviews of these complex filings.
Ms. Rebholz noted that the Big Data Working Group had received numerous concerns in response to the proposal. Chief among these concerns were confidentiality issues, questions about putting the NAIC in the role of consultant, and the fact that the NAIC, although not a regulatory body, would be put in a position to make evaluations that could determine the outcomes of filings. Ms. Rebholz conceded that these concerns are valid, but noted that there needs to be some sort of solution for states confronted with these complex rate filings.
An attendee suggested that a standardized summary form might provide the balance needed for states to review these filings without the task being so onerous. Ms. Rebholz responded that a standardized form might help, but the information provided on the form would still need to be useful to insurance commissioners. Ms. Rebholz concluded that the Big Data Working Group would continue to look for a solution.
Auto Insurance. Cari Lee, Administrator of OCI's Division Regulation and Enforcement, began by explaining that the Auto Insurance Working Group was created to come up with a comprehensive data call related to the availability and affordability of auto insurance. She noted that the comprehensive nature of the data call would make it a “big lift” for insurers to respond, resulting in a standstill for several months.
Partial resolution may have been achieved at this summer’s NAIC meeting in Philadelphia, where statistical agents offered to assemble aggregate data that will be available to states by the end of the year. Once the information has been assembled, the Auto Insurance Working Group will determine whether additional data is needed, although it was conceded that additional information may be required because the aggregate data will not be broken down by insurer.
Rick Parks commented that “affordability” has never been a part of rate setting, and that the appropriate parameters have been whether rates are adequate, not excessive, and not discriminatory.
Market Regulation Accreditation. Rebecca Rebholz provided a brief update on the NAIC’s pilot program for Market Regulation Accreditation. The goal of the program is to see whether a market regulation accreditation is workable nationwide. Currently, the pilot program is active in 14 states, including Wisconsin. The program includes a checklist of items related to states’ insurance market regulation with the goal of providing consistency among states. Current benchmarks relate to the processes and procedures of states’ market conduct reviews. Written reports on the pilot program will be submitted this fall, but Wisconsin seems to be “at or above” most other states in the pilot program in terms of meeting the pilot program’s benchmarks.
Governor’s Steering Committee on Autonomous and Connected Vehicle Testing and Deployment
OCI Public Information Officer Elizabeth Hizmi introduced Daniel Yeh of the Wisconsin Department of Transportation, who was present to speak about the Governor’s Steering Committee on Autonomous and Connected Vehicle Testing and Deployment. This committee, created by executive order, had its first meeting earlier in September.
Mr. Yeh began by noting that the Committee’s charge is to provide a report to the Governor by June 2018. He noted that the task is extremely large, multi-faceted, and needs to be addressed “one bite at a time.” He also noted that Wisconsin is one of 15 or 16 states with a similar committee, and that the federal government has begun to address the topic through legislation such as the SELF DRIVE Act. This act establishes the National Highway Traffic and Safety Administration as the primary agency overseeing the deployment of autonomous and connected vehicles, and places the federal focus on the regulation of vehicles, leaving questions of regulating driving and insurance to the states.
Mr. Yeh stated that the Committee is currently examining different issues for consideration over the coming months. One question the Committee might examine relates to how the insurance industry should handle drivers who have poor driving records but drive an autonomous or connected vehicle. Mr. Yeh also raised related questions such as the Department of Transportation’s driving exam, which traditionally has not been based on the equipment of a person’s vehicle (though that has changed in recent years as technologies such as rear-view cameras have become more common). The Committee is also looking at things like where to draw the line between the “testing” and “deployment” of autonomous and connected vehicles, with testing being of particular interest to Wisconsin.
Mr. Yeh noted that the Committee has a website and would welcome any input on these and related topics. Interested individuals can email email@example.com for more information.
Wisconsin Legislative Update
Wisconsin Budget. Elizabeth Hizmi noted that the Wisconsin budget had passed the State Assembly that week. Included in the budget was the elimination of the Local Government Property Insurance Fund. Also included were a reduction in non-resident insurance appointment fees from $30 to $10, effective January 1, 2019, and a transfer of the OCI IT department to the state Department of Administration, which OCI hopes will lead to increased security and the ability to move more services online.
OCI Technical Bill. Elizabeth Hizmi noted that OCI had completed the draft of its technical bill, which includes the corporate governance model as well as provisions related to NAIC accreditation.
Wisconsin Insurance Plan
Tim Cornelius, an OCI attorney, reported that the draft of changes to § Ins 4.10 of the Wisconsin Administrative Code, which governs the Wisconsin Insurance Plan, Wisconsin's property insurer of last resort, is almost complete. The changes include removal of obsolete coverages, an increase in limits from $200,000 to $350,000, and a reduction in the size of the governing board from 15 members to 11.
Several staffing changes were announced, and it was mentioned that a new issue of “Wisconsin Insurance News” would be released this fall.