The NAIC is continuing its review of property and casualty insurers’ use of predictive modeling in rate filings and is developing related guidance materials for states to use in reviewing predictive models. The NAIC is also considering insurers’ use of big data in underwriting life insurance products.
Insurers’ use of predictive modeling continues to expand and, in response to such growing use, the Casualty Actuarial and Statistical (C) Task Force is currently drafting a white paper to provide guidance on best practices in addressing (a) the sources of data used by companies, (b) data points selected by companies as inputs for predictive modeling, (c) how the predictive models were developed, (d) the results generated by predictive models and (e) insurers’ rate filings derived from predictive models. The Task Force stressed that the guidance provided in the white paper will not be designed to preempt state authority but rather will assist regulators in providing greater consistency among states’ review of predictive models. The Task Force aims to complete the white paper by the fall of 2018. In addition, NAIC staff continues to conduct research regarding the use of predictive models and is also in the process of soliciting input from member states to develop guidance for reviewing predictive models. The NAIC legal division is reviewing the legal implications of companies sharing confidential predictive modeling information with state insurance regulators, specifically with respect to the sharing of information among state regulators and how state trade secret laws and confidentiality protections affect the sharing of confidential predictive modeling information. The Big Data (EX) Working Group heard a presentation from LIMRA regarding how insurers are utilizing consumer data in underwriting life insurance products. The presentation provided an overview of the growing use of automated underwriting, insurers’ engagement of third-party vendors to assist in developing automated underwriting programs, and the types of data insurers are using in order to make automated underwriting possible. Discussion following the presentation focused on stakeholder concerns regarding such use of big data, including the lack of consumer disclosures and confidentiality concerns.