About the Author:
Maureen Henderson is counsel at BrownWinick law firm in Des Moines, Iowa. Maureen joined BrownWinick after over 25 years of being an in-house attorney and chief compliance officer with three major insurance companies. Maureen has substantial experience in all aspects of life insurance compliance and risk management including sales and distribution oversight, operations, product and program development, third party administration due diligence, oversight and supervision.
Meeting Summary Notes
- As expected, COVID-19 and Racial unrest were central to the meeting(s)
- The Life Actuarial Task Force (“LATF”) has been very active – in particular on Life Illustrations by adopting AG 49-A, replacing AG-49 on a prospective basis. AG 49-A levels the playing field with products with multipliers, cap buy ups etc. with products that do not have those features. It also provides additional limits on the illustration of policy loan leverage.
- The low interest rate environment was recognized by LATF in the adoption of Revisions to Model #805, Standard Nonforfeiture Law for Individual Deferred Annuities lowering the nonforfeiture interest floor 1% to 0%.
- The Life Risk-Based Capital Working Group adopted the industry requested risk-based capital (RBC) mortgage reporting given the impact of COVID-19 on the RBC formula but deferred the proposal on net operating income (“NOI”) and contemporaneous property values affecting the 2020 year-end RBC calculation.
- The long-awaited Principles on Artificial Intelligence were unanimously adopted by the Innovation & Technology Task Force and the Executive Committee.
- Regulating the use of accelerated underwriting in life insurance is moving forward with the Working Group targeting a first draft by the end of 2020 and finalize work by the 2021 Summer National Meeting. The Center for Economic Justice recommended to the “D” Committee that the factors used in accelerated underwriting by included in the Market Conduct Annual Survey (“MCAS”) – which is being objected by ACLI.
- The Title Insurance Task Force heard presentations including preventing fraud associated with notaries, especially given the pandemic.
The takeaways from the special session on COVID-19: Lessons Learned:
- Business disruption insurance needs to be expanded to pandemics.
- Use of tele-med services has been successful.
- The life insurance industry stepped up to the plate on continuing coverage, despite the pandemic.
- Generally, both industry and the states were prepared for remote work requirements.
The special session on Race & Insurance had three panels:
- “listening session”-what the history tells the industry.
- Present-day practices that potentially disadvantage minorities such as use of big-data, access to health care and lack of financial literacy and access to insurance/final products.
- What are the action steps that the industry can take to improve and address the systemic problems?
- The Executive Committee and Plenary Committee was primarily ministerial and set the locations for the 2024 Summer (Chicago) and Fall (Denver) Meetings.
Any questions, feel free to reach out to Maureen Henderson at Maureen.email@example.com.
Summary of LATF Meetings
Adopted by Life Insurance and Annuities (A) Committee
Virtual 2020 NAIC Summer National Meeting
There were three Task Force meetings held on 8/3, 8/4 and 8/6 during the 2020 Summer National Meeting. Despite COVID-19, there has been considerable activity by LATF.
The Task Force adopted minutes from June 25, June 18, June 11, June 4, May 28, May 21, May 14 and May 7 meetings including the adoption of:
- Changes to the Standard Nonforfeiture Law for Individual Deferred Annuities (#805). Amendment proposal 2020-05, which modifies the net premium reserve (NPR) to reflect continuous deaths and immediate payment of claims.
- Actuarial Guideline XLIX-A—The Application of the Life Illustrations Model Regulation to Policies with Index-Based Interest to Policies Sold After November 25, 2020 (AG 49-A).
- Amendment proposal 2020-06, which establishes a process for replacing the London Interbank Offered Rate (LIBOR).
- Amendment proposal 2020-07, which modifies VM-02, Minimum Nonforfeiture Mortality and Interest of the Valuation Manual by replacing the fixed 4% floor for the life minimum nonforfeiture interest rate with a reference to the rate used to determine the minimum funding for the cash value accumulation test in Internal Revenue Code § 7702 that will serve as the floor, as previously intended, but it will change as appropriate if this § 7702 rate changes.
The Task Force heard an update:
- On the results of the yearly renewable term (YRT) field test modeling and range of interpretation survey from the American Academy of Actuaries (Academy) YRT Field Test Project Oversight Work Group, Oliver Wyman, and NAIC staff.
- From the Academy Annuity Reserves Work Group (ARWG) on the proposed timeline and approach for the development of a principle-based reserving (PBR) framework for non variable annuities.
- From the Interstate Insurance Product Regulation Commission (Compact).
- From the Society of Actuaries (SOA) on research and education.
- From the Academy PBR Governance Work Group.
- Heard an update from the Academy Council on Professionalism.
The Task Force exposed:
- Amendment proposal 2019-33, which provides for the application of PBR requirements for group life insurance contracts with individual risk selection criteria issued under insurance certificates.
- Section 4B of the model with various nonforfeiture rate floor options between one half of one percent (0.5%) and zero percent, inclusive.
- Exposed the SOA update of 2020 Life Mortality Improvement Factors.
- Amendment proposal 2020-03, which clarifies that exact calculations for the NPR are allowed.
- Amendment proposal 2019-34, which affirms that policies subject to the Standard Valuation Law (#820), prior to becoming parties to modified coinsurance (mod-co) agreements, are still subject to Model #820 after entering the mod-co agreements, and it provides guidance related to the actuarial opinion and asset adequacy analysis.
- The 2021 Generally Recognized Expense Table (GRET) recommendation.
Finally, the Task Force discussed proposed changes to the Model #805 nonforfeiture interest rate floor.
Report on the 2020 NAIC Summer National Meeting – Week of 7/27/2020
Annuity Suitability (A) Working Group of the Life Insurance and Annuities (A) Committee: Review and revise, as necessary, the Suitability in Annuity Transactions Model Regulation (#275). Chaired by Commissioner Ommen (Iowa) met July 29, 2020. During this meeting, the Working Group adopted its 2019 Fall National Meeting minutes and its Dec. 19, 2019, minutes.
At the December meeting, the comments received on the draft of proposed revisions to the Suitability in Annuity Transactions Model Regulation (#275) related to the proposed appendices were reviewed and revised. The revised draft was forwarded to the Committee for its consideration during the Committee’s Dec. 30, 2019, conference call.
Four states: Idaho, Iowa, Kentucky, Ohio and Rhode Island updated the Working Group on their efforts to adopt the revised Model #275 including any challenges they encountered.
The Working Group discussed the development of a frequently asked questions (FAQ) document to assist the states as they move forward with adopting the revised Model #275 and implementing its provisions. The Working Group decided to expose the draft FAQ document for a 30-day public comment period and at the end of the comment period hold a conference call in September to discuss the comments received.
Group Capital Calculation (E) Working Group of the Financial Condition (E) Committee: The mission is to construct a U.S. group capital calculation (GCC) using a RBC aggregation methodology, complete by the 2020 Summer National Meeting and provide direction (by the 2020 Fall National Meeting) to the Group Solvency Issues (E) Working Group on appropriate changes to existing authority or existing regulatory guidance related to the GCC.
Chaired by David Altmaier (Florida) the working group met on Wednesday, July 29th to continue the discussions around proposed changes to the Insurance Holding Company System Regulatory Act (#440).
After adopting the meeting minutes from 7/21, 6/2 and 5/19, the meeting focused on Comments received on an Exposed Revised Template & Instructions. Comments were submitted by: the American Council of Life Insurers (“ACLI”), America’s Health Insurance Plans (“AHIP”), American Property Casualty Insurance Association (“APCIA”), a coalition of fourteen companies: Brighthouse Financial, CNO Financial, Genworth Financial, Global Atlantic Financial Group, Hannover Life Reassurance Company of America, Jackson National Life Insurance, Lincoln Financial Group, National Life Group, Principal Financial Group, Protective
Life, Reinsurance Group of America, Sammons Financial Group, Standard Insurance Company and Transamerica, Global Atlantic Financial Group, Prudential, State Farm, UnitedHealth Group.
The NAIC staff summarized the comments in a chart that sequentially followed the template that
Commissioner Altmaier reviewed during the meeting. Given the number of comments, there was not enough time to walk through them. Moreover, there were no conclusions made during the meeting.Commissioner Altmaier said that he would schedule an additional meeting to continue the dialogue on the comments.
Market Analysis Procedures (D) Working Group of the Market Regulation and Consumers Affairs (D) Committee: The NAIC’s Market Analysis Procedures Working Group (MAP) is the national forum for states to share and coordinate their market analysis programs. MAP reviews and coordinates state market analysis programs and develops procedures for uniform, nationwide analysis using their adopted Framework for Market Analysis.
Chaired by John Haworth (Washington-Alternate Collaborative Action Designees “CAD”). The Group adopted the March 23rd, February 20th and January 30th minutes and then continued its discussions regarding revisions to the MCAS Best Practices Guide-which were included with the materials. When the revisions are completed, the drafting group will move on to other MCAS documents.
The Working Group discussed the Market Analysis Framework and asked for comments to be reviewed the next meeting. The Working Group then adopted scorecard ratios for the Private Flood MCAS Blank, which closely match the Homeowners and Private Passenger Auto scorecard ratios with the addition of a ratio to measure lawsuits closed with consideration for the consumer.
Finally, there was discussion as to the MCAS Attestation process although no changes to the current process were made.
Life Risk-Based Capital (E) Working Group of the Capital Adequacy (E) Task Force: The mission is to evaluate refinements to the existing NAIC risk-based capital (RBC) formulas implemented in the prior year, forward the final version of the structure of the current year life and fraternal, property/casualty (P/C), and health RBC formulas to the Financial Condition (E) Committee by June.
Chaired by Philip Barlow (D.C. Collaborative Action Designee “CAD”). The Working Group adopted its July 10, June 30, June 11, and Spring National Meeting minutes and the Life RBC Newsletter. The Group discussed the 2019 RBC statistics and spent most of the meeting discussing the industry’s request for RBC reporting guidance for Net Operating Income (“NOI”) given the impact of the COVID-19 pandemic.
Both ACLI and the Mortgage Banking Association (“MBA”) submitted a revised recommendation based on the regulator feedback. The industry recommends, “…where a value of 2020 NOI is an input into the computation of the Rolling Average NOI, insurers should use the greater of: 2020 NOI or 85% of 2019 NOI.
There was discussion but no decisions. This will be a continuing open issue for the Working Group’s working agenda and upcoming conference calls.
Accelerated Underwriting (A) Working Group of the Life Insurance and Annuities (A) Committee: The mission is 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.
Chaired by Director Robert Muriel (Illinois) The Accelerated Underwriting (A) Working Group met July 31, 2020 and adopted meeting minutes from March 12th, February 20th, February 2nd, January 23rd and 2019 Fall National Meeting Minutes. There have been presentations from multiple interested parties, including consulting firms, lawyers, consumer representative organizations, and the American Academy of Actuaries.
There was a presentation on the work of the Working Group, including the process that has been followed, some of the lessons learned, and the timeline for completion of its charge: 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.”
ERISA (B) Working Group of the Regulatory Framework (B) Task Force: The mission is to monitor, report and analyze developments related to the federal Employee Retirement Income Security Act (ERISA), and make recommendations regarding NAIC strategy and policy with respect to those developments.
The ERISA (B) Working Group chaired by Robert Wake (Maine) met July 31, 2020 and adopted its 2019 Fall National Meeting minutes and discussed what the Working Group should focus on in 2021, including reviewing the Prevention of Illegal Multiple Employer Welfare Arrangements (MEWAs) and Other Illegal Health Insurers Model Regulation (#220) to consider its continuing relevance. The regulator’s focus is on fraudulent health plans through agents and unions.
Report on 2020 NAIC Summer National Meeting – Week of 8/10/2020
Open Session-Hosted by Director Ray Farmer (South Carolina)
Director Farmer welcomed the attendees of the virtual meeting. He spent a great deal of time on the role of insurance in the pandemic and the social unrest and previewed the special sessions. Commissioner Steve Kelley (Minnesota) gave a virtual tour of Minneapolis – where the meeting was supposed to have taken place.
Special Session One: COVID-19: Lessons Learned-COVID 19-Three-part presentation hosted by Jillian Froment (Ohio) and Mike Consendine, CEO of the NAIC. The first session included Amy Bach, Executive Director of United Policyholders, Robert Fee, President, Independent Insurance Agents & Brokers of America and Neil Abramson, President of the National Association of Resale Professionals and was focused on the impact on consumers, agents and small business. Overall, the consensus was that the industry had performed fairly well though there was criticism of the health care sector for cancelling individual’s insurance early in the pandemic before the regulators issued bulletins prohibiting such actions and the denial of insurance for business interruption.
The second session was from the industry perspective with participation from Dr. Daniel Knecht, Vice President, Transformation Clinical Product CVS Health, Todd Henderson, SVP and Chief Risk Officer, Western & Southern Financial Group and TJ Obrokta Jr., President and CEO of Encova Insurance. Some of the successes noted by the panel: use of Telemed services; persistency of life insurance and the industry’s ability to work remote. Concerns raised: failure of timely testing of the virus, financial pressure on the life industry due to the low interest rate environment and small businesses going under due to the shutdown/recession.
The final session was regulator only with Director, Lori Wing-Heier (Alaska), Commissioner Marlene Caride (New Jersey), Commissioner Jon Godfread (North Dakota) and Commissioner Scott White (Virginia) participating. There was a lot of discussion regarding the preparedness of the respective insurance departments to work remote and serve the public. The regulators all agreed that the insurance industry overall had performed very well, and that the pandemic has changed how business will be done in the future.
Life Insurance and Annuities (A) Committee: The mission of the Life Insurance and Annuities Committee is to consider issues relating to life insurance and annuities and review new life insurance products.Chaired by Director Jillian Froment (Ohio) it:
Minutes from the July 10th meeting including the following activities:
- Adopted Dec. 30, 2019, and 2019 Fall National Meeting minutes.
- Adopted technical revisions to Actuarial Guideline XLVIII—Actuarial Opinion and Memorandum Requirements for the Reinsurance of Policies Required to be Valued under Sections 6 and 7 of the NAIC Valuation of Life Insurance Policies Model Regulation (Model 830) (AG 48).
- Adopted Valuation Manual amendments.
- Adopted Actuarial Guideline XLIX-A—The Application of the Life Illustrations Model Regulation to Policies with Index-Based Interest (AG 49-A).
- Adopted the working group and task force reports:
- The Annuity Disclosure (A) Working Group, including its March 12 minutes and an extension of the Request for NAIC Model Law Development.
- The Accelerated Underwriting (A) Working Group, which met July 31 and heard an update presentation on its work and adopted its March 12, Feb. 20, Feb. 2, Jan. 23, and 2019 Fall National Meeting minutes
- The Annuity Suitability (A) Working Group, which met July 29 and adopted its Dec. 19, 2019, and 2019 Fall National Meeting minutes and agreed to work on a draft frequently asked questions (FAQ) document to complete the second half of its charge to “consider how to promote greater uniformity across NAIC-member jurisdictions.”
- The Life Insurance Illustration Issues (A) Working Group, including its July 30 minutes and an extension of the Request for NAIC Model Law Development.
- The Life Actuarial (A) Task Force. Discussed next steps for the Life Insurance Online Guide (A) Working Group which had been the former DC Commissioner’s Working Group, including identifying other state regulators to be on the Working Group and the planning process.
- Discussed next steps for the Retirement Security (A) Working Group including identifying other state regulators to be on the Working Group and the planning process, to avoid duplication of efforts
- Discussed whether the Committee should open the life insurance and annuity illustrations models given feedback from the Economic Center for Justice continued concerns.
Market Regulation and Consumer Affairs (D) Committee: The mission of the Market Regulation and Consumer Affairs (D) Committee is to monitor all aspects of the market regulatory process for continuous improvement. This includes market analysis, regulatory interventions with companies and multijurisdictional collaboration. The Committee will also review and make recommendations regarding the underwriting and market practices of insurers and producers as those practices affect insurance consumers, including the availability and affordability of insurance.
Chaired by Commissioner Barbara D. Richardson (Nevada) Adopted:
Task Force and Working Group Reports:
- Antifraud (D) Task Force
- Market Information Systems (D) Task Force
- Producer Licensing (D) Task Force
- Market Conduct Examination Standards (D) Working Group
- Market Analysis Procedures (D) Working Group
- Market Conduct Annual Statement Blanks (D) Working Group
- Market Regulation Certification (D) Working Group
- Privacy Protections (D) Working Group
- Market Actions (D) Working Group
Advisory Organization Examination Oversight (D) Working Group Alliance of Health Care Sharing Ministries: Nancy Atkins (Executive Vice President of Government Relations, One Share Health) and Katy Talento (Executive Director, Alliance of Health Care Sharing Ministries) gave a presentation. There was discussion about the Template for Wavier of Onsite Reviews
Adoption of Standardized Data Requests
- Limited Long-Term Care Examination Standards Chapter
- Inland Marine In Force Standardized Data Request
- Inland Marine Claims Standardized Data Request
Financial Condition (E) Committee: The mission of the Financial Condition (E) Committee is to be the central forum and coordinator of solvency-related considerations of the NAIC relating to accounting practices and procedures; blanks; valuation of securities; financial analysis and solvency; multistate examinations and examiner and analysis training; and issues concerning insurer insolvencies and insolvency guarantees.
Chaired by Commissioner Scott White (Virginia) The Committee adopted:
- The July 1, June 12, May 15 and March 26 minutes and actions.
- A request for NAIC Model Law Development from the Receivership and Insolvency (E) Task Force.
- A request for NAIC Model Law Development from the Financial Stability (EX) Task Force.
- A request for extension from the Mortgage Guaranty Insurance (E) Working Group regarding ongoing work on an NAIC model.
- Technical revisions to the Term and Universal Life Insurance Reserve Financing Model Regulation (#787) and acknowledged the similar technical revisions made to Actuarial Guideline XLVIII—Actuarial Opinion and Memorandum Requirements for the Reinsurance of Policies Required to be Valued under Sections 6 and 7 of the NAIC Valuation of Life Insurance Policies Model Regulation (Model 830) (AG 48) by the Life Insurance and Annuities (A) Committee.
- Actions from the Capital Adequacy (E) Task Force, the Valuation of Securities (E) Task Force, and the Accounting Practices and Procedures (E) Task Force, with the exception of Interpretation (INT) 20-08: COVID19 Premium Refunds, Limited-Time Exception, Rate Reductions and Policyholder Dividends, which was rejected and sent back to the Accounting Practices and Procedures (E) Task Force.
- A memorandum from the Committee to all commissioners regarding the treatment of the London Interbank Offered Rate (LIBOR) under state investment laws.
- An extension of mortgage forbearance previously adopted by the Committee through Sept. 30, 2019.
- Mortgage forbearance through June 30.
- Adopted the reports of the following task forces and working groups:
- The Accounting Practices and Procedures (E) Task Force.
- The Capital Adequacy (E) Task Force, the Receivership and Insolvency (E) Task Force.
- The Reinsurance (E) Task Force, the Valuation of Securities (E) Task Force.
- The Group Capital Calculation (E) Working Group, and the Group Solvency Issues (E) Working Group.
- Adopted a revised INT 20-08.
Financial Regulation Standards and Accreditation (F) Committee: The mission of the NAIC accreditation program is to establish and maintain standards to promote sound insurance company financial solvency regulation.
Chaired by Commissioner Todd Kiser (Utah) The Committee met on Aug. 10, July 21 and June 23, 2020, in regulator-to-regulator session, pursuant to paragraph 7 (consideration of individual state insurance department’s compliance with NAIC financial regulation standards) of the NAIC Policy Statement on Open Meetings, to:
- Discuss state-specific accreditation issues.
- Vote to award continued accreditation to the insurance departments of Delaware, Louisiana, Maryland, Oregon, Rhode Island and Washington.
On Aug. 12, 2020, the Committee adopted:
- Its 2019 Fall National Meeting minutes.
- Insignificant revisions made during 2019 to NAIC publications that are required for accreditation purposes (e.g., the Accounting Practices and Procedures Manual [AP&P Manual])
- A referral to confirm that the 2019 and 2011 revisions to the Credit for Reinsurance Model Law (#785) and the Credit for Reinsurance Model Regulation (#786) are applicable to risk retention groups (RRGs) as an accreditation standard. The revisions address the reinsurance collateral requirements necessary for U.S. ceding companies to take credit for certain reinsurance transactions and are effective Sept. 1, 2022, with enforcement to begin Jan. 1, 2023.
- Technical changes to the new accreditation standard for Term and Universal Life Insurance Reserve Financing Model Regulation (#787) to update a reference that was revised in 2020.
- Exposed proposed revisions to the Review Team Guidelines and the Self-Evaluation Guide for Part C: Organizational and Personnel Practices, for a 30-day public comment period ending Sept. 11.
- The revisions incorporate consideration of where each department’s average salaries fall in relation to the range as defined in the Financial Analysis Handbook and the Financial Condition Examiners Handbook.
- Exposed proposed revisions to the Review Team Guidelines for Part B1: Financial Analysis for a 30-day public comment period ending Sept. 11. The proposed revisions consist of a technical clarification related to RRGs and the use of the “Captives and/or Insurers Filing on a U.S. GAAP Basis Worksheet.”
Executive (EX) Committee:The mission of the Executive (EX) Committee is to manage the affairs of the NAIC under the Articles and Bylaws. Chaired by President Ray Farmer (South Carolina) was quite lengthy and administrative as there were so many reports that the Committee had to adopt/discuss.
The Committee adopted the report of the joint meeting of the Executive (EX) Committee and the Internal Administration (EX1) Subcommittee from July 14 which adopted:
- Its May 12 minutes.
- The Internal Administration (EX1) Subcommittee’s May 20 minutes:
- Received an update on the Defined Benefit Plan portfolio as of March 31.
- Received an update on the NAIC long-term investment plan portfolio as of March 31.
- Approved a recommendation to replace one of the NAIC’s fund managers responsible for short-term bond funds.
- The report of the Audit Committee including the 2019/2020 Service Organization Control (SOC) 1 and SOC 2 reports.
- Received an update on the 2020 financial results and preliminary 2021 budget assumptions and approved an extension of unused 2020 grant funds to the end of 2021.
- Established a Special Committee on Race and Insurance.
- Established the Climate & Resiliency (EX) Task Force and adopted its draft charges.
- Received a System for Electronic Rate and Form Filing (SERFF) Assessment and directed NAIC staff to prepare and issue a request for proposal (RFP) to solicit proposals to help complete a “modernization pilot” and “Wave One” as recommended in the SERFF Assessment.
- Approved Management’s recommendation to extend the residential mortgage-backed securities (RMBS)/commercial mortgage-backed securities (CMBS) modeling contract with BlackRock for another year.
- Approved the release of the Economic Scenario Generator (ESG) fiscal for a two-week public review period prior to a final vote of the Executive (EX) Committee during a future meeting.
- Approved a U.S. Department of Labor (DOL) Information Sharing Agreement.
- Selected the meeting locations for the 2024 summer and fall national meetings:
- The 2024 Summer National Meeting will be held in Chicago, IL
- The 2024 Fall National Meeting will be held in Denver, CO.
- Received the joint chief executive officer (CEO)/chief operating officer (COO) report.
- The report of the Executive (EX) Committee meetings from May 12, April 2, Feb. 13 and Jan. 10 including adoption of:
- The 2019 Fall National Meeting minutes of the joint meeting of the Executive (EX) Committee and the Internal Administration (EX1) Subcommittee.
- Its April 2, Feb. 13 and Jan. 10 minutes.
- The report of the Audit Committee.
- The report of the Investment Committee.
- The recommendation of the Life Actuarial (A) Task Force to delay the start of Principle- Based Reserving (PBR) Experience Data Reporting from 2020 to 2021.
- Appointed Commissioner Vicki Schmidt (KS) and Director Bruce R. Ramge (NE) to serve on the National Insurance Producer Registry (NIPR) Board of Directors effective May 12.
- Heard a report on a change in membership for the SERFF Advisory Board. Andrea Davey (Athene Annuity and Life Company) will serve as the Life Insurance Representative on the SERFF Advisory Board.
- Discussed the National Association of Registered Agents and Brokers (NARAB) Board recommendations.
- Heard an update on the ESG RFP.
- Heard an update on the SERFF Assessment.
- Heard an update on NAIC cybersecurity.
- Discussed the status of the Mid-Year Roundtable and the Summer National Meeting.
- Heard a joint CEO/COO report.
- Discussed 2020 NAIC Strategic Priorities in light of COVID-19.
- Received an update on the 2019 Year-End Financial Results.
- Approved the fiscal impact statement for the Long-Term Care Insurance Data Call and authorized Management to contract with a selected vendor.
- Approved the fiscal impact statement for the SERFF Filing Review Tools Pilot.
- Approved the following non-regulator appointments to the SERFF Advisory Board: Birny Birnbaum (Center for Economic Justice—CEJ) as the Consumer Representative; Theresa Boyce (Chubb Group) for Property & Casualty (P&C); Amanda Wheeler (LifeSecure Insurance Company) for Life Insurance; and Rachel Benton (Bright Health) for Health Insurance and Vice-Chair.
- Appointed Director Chlora Lindley-Myers (MO) as vice chair of the 2020 Consumer Participation Board of Trustees.
- Appointed Commissioner Mark Afable (WI) to serve on the NIPR Board of Directors effective Feb. 13.
- Received an update confirming the committee structure changes: the Executive (EX) Committee disbanded the joint Long-Term Care Insurance (B/E) Task Force, the NAIC/State Government Liaison Committee, and the NAIC/Industry Liaison Committee; and the Executive (EX) Committee also removed the membership limit on the Life Actuarial (A) Task Force and the Health Actuarial (B) Task Force.
- Approved the fiscal impact statement for the PBR Yearly Renewable Term Reinsurance Study.
- Voted to release for public review and comment the Long-Term Care Insurance Data Call and Analysis fiscal impact statement.
- Approved the debt restructure terms between the NAIC and Interstate Insurance Product Regulation Commission (Compact).
- Appointed Florida, Idaho, Kentucky, Massachusetts, Missouri, Nebraska, Nevada, Ohio and Oklahoma as members of the NAIC 2020 Audit Committee.
- Adopted the reports of its task forces:
- 1) the Financial Stability (EX) Task Force;
- 2) the Government Relations (EX) Leadership Council;
- 3) the Innovation and Technology (EX) Task Force, including the Artificial Intelligence Principles; and
- 4) the Long-Term Care Insurance (EX) Task Force, including its three new subgroup charges.
- Adopted Requests for NAIC Model Law Development to amend the Insurance Holding Company System Regulatory Act (#440), the Insurance Holding Company System Regulation with Reporting Forms and Instructions (#450), and the Standard Nonforfeiture Law for Individual Deferred Annuities (#805).
- Received the 2019 Annual Report of the NAIC Designation Program Advisory Board.
- Received a status report on the NAIC State Ahead strategic plan implementation.
- Received a status report on model law development efforts for amendments to the Model Regulation to Implement
- the Accident and Sickness Insurance Minimum Standards Model Act (#171);
- the Annuity Disclosure Model Regulation (#245); the Health Maintenance Organization Model Act (#430);
- Model #440; Model #450;
- the Life Insurance Disclosure Model Regulation (#580);
- the Mortgage Guaranty Insurance Model Act (#630); the Unfair Trade Practices Act (#880);
- and new models, including the Real Property Lender-Placed Insurance Model Act, the Pet Insurance Model Law, and the Pharmacy Benefit Manager (PBM) Model Law.
- Heard a report from the Compact.
Special Session Three: Race & insurance – A Candid Dialogue on the Role of the Insurance Sector in Addressing Racial Inequality and Promoting Diversity in the Insurance Industry
Overview: This session served as a formal public kick-off to an intentional effort by NAIC members to critically examine the role of the organization in: (1) addressing ongoing, potential racially discriminatory practices in the design, pricing and sale/access of insurance products, and (2) ways to promote diversity and inclusion within the insurance sector. There was lively discussion and real-life stories shared by the panelists and regulators. There was particular attention by the consumer advocates on the need to regulate artificial intelligence and big data.
The first panel moderated by Director Chlora Lindley-Myers (MO) was designated a “listening session” designed to help inform the NAIC of potential new actions. It provided historical background of racial discrimination with the insurance industry with a focus on (life, P&C) underwriting, rating, and sales along with associated regulatory response. The panelists: Dr. Robert Klein, Consultant, Robert W. Klein and Associates, George Nichols III, President and CEO, The American College of Financial Services and Dr. Leroy D. Nunery II, Founder & Principal, PlūsUltré LLC.
The second panel moderated by Commissioner Andrew N. Mais (CT) discussed the present day racially based challenges within the insurance industry such as practices that potentially disadvantage minorities, including use of big-data and algorithmic-based underwriting models (i.e., proxy discrimination), access to quality and affordable healthcare, and low levels of financial literacy and access to insurance/financial products. The panelists: Birny Birnbaum, Executive Director, Center for Economic Justice, Dora Hughes MD, MPH, Associate Research Professor of Health Policy & Management, Milken Institute School of Public Health, The George Washington University and Sonja Larkin-Thorne, Consumer Advocate & Retired Insurance Executive.
Moderated by Director Dean Cameron (ID), the final panel focused on what specific steps that both regulators and stakeholders can take to improve diversity and inclusion within the insurance sector. The panelists: Commissioner Ricardo Lara (CA), Commissioner Andrew N. Mais (CT), Director Robert H. Muriel (IL), Commissioner Mike Chaney (MS), Commissioner Jessica K.Altman (PA), Executive Deputy Superintendent My Chi To (NY) and Commissioner Hodgen Mainda (TN).
NAIC Consumer Liaison Committee-The mission of the NAIC/Consumer Liaison Committee is to assist the NAIC in its mission to support state insurance regulation by providing consumer views on insurance regulatory issues.
Chaired by Commissioner Michael Conway, the Liaison Committee adopted:
- Its June 19 and 2019 Fall National Meeting minutes and had multiple presentations.
- A presentation from Amy Bach (United Policyholders—UP) on COVID-19 related business interruption claims, coverage issues, disputes and litigation and highlighted the lack of and need for business interruption coverage for a pandemic.
- A presentation from Erica Eversman (Automotive Education & Policy Institute—AEPI) on digital claims handling and photo-estimating and focused on the need for additional consumer education and consumer protection in the form of advance notifications regarding initial claim payments and follow up claim payments, especially during the COVID-19 pandemic.
- A presentation from Birny Birnbaum (Center for Economic Justice—CEJ) proposing a model law to modernize insurance rate and form regulation that would address algorithmic bias plans used on patients and markets.
- A presentation from Wayne Turner (National Health Law Program—NHLP), Ashley Blackburn (Community Catalyst—CC), and Deborah Darcy (American Kidney Fund—AKF) on improving equity in health care access and discussed how the pandemic highlighted the problem of inequity and discrimination in the equal and adequate access to health care for consumers.
- A presentation from Amy Killelea (National Alliance of State and Territorial AIDS Directors—NASTAD) on addressing the needs of patients and consumers in the COVID-19 pandemic including the importance of reasonable pre-authorization standards for the utilization management of formulary medications, especially those used for pre-exposure prophylaxis (PrEP).
- A presentation from Bonnie Burns (California Health Advocates—CHA) on the Consolidated Omnibus Budget Reconciliation Act of 1986 (COBRA), Medicare, and the NAIC Coordination of Benefits Model Regulation (#120). Ms. Burns recommended that state insurance regulators revise Model #120, so it no longer allows insurers to avoid paying for medical treatment when an insured person is eligible for Medicare but not enrolled in Medicare Part B because they are still covered by their employer.
Joint Meeting of the Executive (EX) Committee and Plenary-Chaired by Director Ray Farmer and was very process orientated including both adoption and receipt of multiple reports as noted below.
- Adoption of the Aug. 13 Report of the Executive (EX) Committee.
- Adoption of the Artificial Intelligence Guiding Principles.
- Adoption by Consent the Committee, Subcommittee and Task Force Minutes of the 2019 Fall National Meeting, Dec. 7–10, 2019.
- Adoption of its Interim Meeting Minutes.
- Received the Aug. 11 Report of the Life Insurance and Annuities (A) Committee
- Adoption of Technical Revisions to Actuarial Guideline XLVIII—Actuarial Opinion and Memorandum Requirements for the Reinsurance of Policies Required to be Valued under Sections 6 and 7 of the NAIC Valuation of Life Insurance Policies Model Regulation (Model 830)
- Adoption of Amendments to the Valuation Manual
- Adoption of Actuarial Guideline XLVIX-A—The Application of the Life Illustrations Model Regulation to Policies with Index-Based Interest (AG 49-A)
- Received the Aug. 11 Report of the Health Insurance and Managed Care (B) Committee
- Received the Aug. 12 Report of the Property and Casualty Insurance (C) Committee
- Adoption of the Considerations for State Insurance Regulators in Building the Private Flood Insurance Market
- Received the Aug. 11 Report of the Market Regulation and Consumer Affairs (D)
- Adoption of the NAIC Continuing Education Reciprocity (CER) Agreement – 2019 Version
- Received the Aug. 11 Report of the Financial Condition (E)
- Received the Aug. 12 Report of the Financial Regulation Standards and Accreditation (F) Committee
- Adoption of the 2019 Revisions to the Credit for Reinsurance Model Law (#785) and the Credit for Reinsurance Model Regulation (#786) as an Addition to the Part A Accreditation Standards
- Adoption of the Term and Universal Life Insurance Reserve Financing Model Regulation (#787) as a New Part A Accreditation Standard
- Received the Aug. 12 Report of the International Insurance Relations (G) Committee
- Received a Status Report of State Implementation of NAIC-Adopted Model Laws and Regulations
Report on 2020 NAIC Summer National Meeting
Antifraud (D) Task Force of the Market Regulation and Consumer Affairs (D) Committee- The mission of the Antifraud (D) Task Force is to serve the public interest by assisting the state insurance supervisory officials, individually and collectively, through the detection, monitoring and appropriate referral for investigation of insurance crime, both by and against consumers.
Chaired by Trinidad Navarro (Delaware). The Task Force adopted its May 20 minutes and was updated on antifraud activity specific to the COVID-19 pandemic from California, Florida and Texas. The Task Force also heard reports from the antifraud organization of the CAIF and the NICB.
There was an update from the Antifraud Education Enhancement (D) Working Group. The Working Group updated the investigator safety regarding COVID-19 safety precautions and has scheduled a webinar on Aug. 26.
The Antifraud Technology (D) Working Group reported to the Task Force and has worked with NAIC staff to update a revised draft of the Antifraud Plan Guideline (#1690) for distribution. The Working Group will distribute the new draft for a public comment period ending Aug. 28.
Big Data (EX) Working Group of the Innovation and Technology (EX) Task Force- Review current regulatory frameworks used to oversee insurers’ use of consumer and non-insurance data. If appropriate, recommend modifications to model laws and/or regulations regarding marketing, rating, underwriting and claims, regulation of data vendors and brokers, regulatory reporting requirements, and consumer disclosure requirements.
Chaired by Doug Ommen (Iowa): Following the adoption of the 2019 Fall National Meeting minutes, the Working Group received an update from the Casualty Actuarial and Statistical (C) Task Force. The Task Force is drafting a Regulatory Review of Predictive Models white paper to provide best practices for the review of predictive models and analytics filed by insurers to justify rates.
The priority question is whether state insurance regulators can determine whether predictive models, as used in rate filings, are compliant with state laws and regulations. The four best practices for regulatory review include:
- ensure compliance with state rating laws
- review all aspect of a model (data assumptions, adjustments, variables, input and outputs)
- evaluate how a model interacts with and improves the rating plan; and
- enable competition and innovation.
Accelerated Underwriting (A) Working Group Update: The Working Group began its work in October 2019 and met 16 times to gather information about accelerated life insurance underwriting. There have been numerous presentations from actuarial consulting firms, the American Academy of Actuaries (Academy), life insurance companies, consumer advocates and law firms. The next step in the process is to make a recommendation on a final work product. The Working Group will circulate a first draft of its work product by the end of 2020 and complete its work by the 2021 Summer National Meeting.
Long-Term Care Actuarial (B) Working Group of the Health Actuarial (B) Task Force-Assists the Health Actuarial (B) Task Force in completing the following charges: Provide recommendations, as appropriate, to address issues and provide actuarial assistance and commentary with respect to model rules for appropriate LTCI rates, rating practices and rate changes.
Chaired by Perry Kupferman (California). The Working Group adopted its Jan. 23 and 2019 Fall National Meeting minutes and adopted the report of the Long-Term Care Pricing (B) Subgroup meeting minutes. The Working Group adopted the report of the Long-Term Care Valuation (B) Subgroup and heard updates from the American Academy of Actuaries (Academy) on LTCI Work Group activities from the Society of Actuaries (SOA) on LTCI research.
Market Information Systems (D) Task Force of the Market Regulation and Consumer Affairs (D)
Committee-The mission of the Market Information Systems (D) Task Force is to provide business expertise regarding the desired functionality of the NAIC Market Information Systems and the prioritization of regulatory requests for the development and enhancements of the NAIC Market Information Systems.
Chaired by Lori Wing-Heier (Alaska) the Task Force adopted its 2019 Fall National Meeting minutes and adopted the report of the Market Information Systems Research and Development (D) Working Group. The Task Force also reviewed the outstanding Uniform System Enhancement Request (USER) forms:
- USER Form 10072 was completed. This USER form requested the ability for companies to submit new filings for prior years once the Market Conduct Annual Statement (MCAS) has been closed for submission of the current year.
- USER Form 10051 is in progress. This USER form requests implementation of the Market Action Tracking System (MATS) web service in State Based Systems (SBS) to provide automated submission of information to the MATS.
- USER Form 10080 is in progress. This USER form requests that the Regulatory Information Retrieval System (RIRS) be updated to display data retention policies and terminology related to action dates.
- USER Form 10053 is still in detailed analysis. This USER form calls for a review of RIRS codes by the RIRS Code Review Working Group to clarify definitions for consistent usage and provide recommendations for revisions.
- Approved USER Forms 10069B and 10082 to add a Complaints Database System (CDS) subject code of “pandemic” and coverage codes for “lender-placed insurance” and “pet insurance.”
- Adopted USER Forms 10069B and 10082 to add a CDS subject code of “pandemic” and coverage codes for “lender-placed insurance” and “pet insurance.”
The Center for Economic Justice (B. Birbaum) gave a lengthy presentation to the Task Force on the use of artificial intelligence (AI) in market information. It was quite provocative, including the use of facial analytics to determine if insurance companies were truthful to its regulators.
Financial Stability (EX) Task Force of the Executive Committee:The mission of the Financial Stability (EX) Task Force is to consider issues concerning domestic or global financial stability as they pertain to the role of state insurance regulators.
Chaired by Commissioner Marlene Caride (New Jersey). The Task Force approved the minutes from its Feb. 26 and 2019 Fall National Meeting. The Task Force was updated as to:
- Financial Stability Oversight Council (FSOC) Developments.
- The Liquidity Assessment (EX) Subgroup on Progress in Achieving its Deliverables Related to Liquidity Stress Testing.
- The Receivership and Insolvency (E) Task Force on its Work to Address the Task Force’s Referral Letter to Undertake Analysis Relevant to the Macroprudential Initiative (MPI).
- The Collateralized Loan Obligation (CLO) Stress Tests.
- The International Association of Insurance Supervisors (IAIS).
- The London Interbank Offered Rate (LIBOR).
- The Task Force then discussed Exposure Comments for the Draft Revisions to the Holding Company Model Law.
Capital Adequacy (E) Task Force of the Financial Condition (E) Committee: The mission of the Capital Adequacy (E) Task Force is to evaluate and recommend appropriate refinements to capital requirements for all types of insurers. Chaired by Tom Botsko (Ohio). The Task Force adopted:
- Its June 30th minutes, the Health Risk-Based Capital (E) Working Group’s July 30th report
- The Life Risk-Based Capital July 30th report including the deferral of the Industry’s requested RBC mortgage reporting guidance for net operating income (NOI)
- The Investment Risk-Based Capital (E) Working Group minutes and re-exposed the bond proposal to include updates to the 2020 annual statement blanks
- The Property and Casualty Risk-Based Capital (E) Working Group’s July 30th report
- The Catastrophe Risk (E) Subgroup’s July 29th report
- Its working agenda and voted to disband the Investment Risk-Based Capital (E) Working Group
- Proposal 2020-03-L (C-3 Instructional Changes and C-3 Guidance)
- Its working agenda and voted to disband the Investment Risk-Based Capital (E) Working Group
- The Task Force exposed 2020-02-CA (ACA Fee Sensitivity Test Removal) for a 30-day public comment period ending Sept. 4th and exposed its 2021proposed charges for a 30-day public comment period ending Sept. 4th.
Title Insurance (C) Task Force of the Property and Casualty Insurance (C) Committee: The mission of the Title Insurance (C) Task Force is to study issues related to title insurers and title insurance producers. Chaired by Commissioner Michael Pieciak (Vermont). There were two presentations during the meeting:
- A Presentation on a New Smartphone App Created to Help Notaries Serve as Gatekeepers Against Title Fraud by David Fleck of Veritable Data Solutions. Mr. Fleck discussed the vectors of title fraud and the primary victims: homeowners (loss of equity) and title insurance carriers (estimated $200M+ per year). Mr. Fleck introduced an application “Veri-lock” for notaries.
- A Panel Discussion on the Effectiveness of Closing Protection Letters (CPLs)—Ronald J. Blitenthal (Old Republic), Elizabeth Blosser (American Land Title Association—ALTA), and Diane Evans (Land Title Guarantee Company).
Reinsurance (E) Task Force of the Financial Condition (E) Committee: The mission of the Reinsurance (E) Task Force is to monitor and coordinate activities and areas of interest, which overlap to some extent the charges of other NAIC groups—specifically, the International Insurance Relations (G) Committee. Chaired by Chlora Lindley-Myers (Missouri) (represented by John Rehagen (MO). The Task Force Adopted:
- June 9th minutes
- Its 2021 proposed charges
- The report of the Reinsurance Financial Analysis (E) Working Group.
- The Working Group met March 11 in regulator-to-regulator session, pursuant to paragraph 3 (specific companies, entities or individuals) of the NAIC Policy Statement on Open Meetings, to adopt the new Uniform Checklist for Reciprocal Jurisdiction Reinsurers and updates to the Uniform Application Checklist for Certified Reinsurers.
- The report of the Qualified Jurisdiction (E) Working Group.
- The Working Group has not met since the 2019 Fall National Meeting. The Working Group has been approached by three countries about becoming qualified jurisdictions and will begin initial reviews in the next several months.
- Received a status report on the states’ implementation of the 2019 revisions to the Credit for Reinsurance Model Law (#785) and Credit for Reinsurance Model Regulation (#786).
Innovation and Technology (EX) Task Force of the Executive Committee: The mission of the Innovation and Technology (EX) Task Force is to provide a forum for regulator education and discussion of innovation and technology in the insurance sector, to monitor technology developments that affect the state insurance regulatory framework, and to develop regulatory guidance, as appropriate.
Chaired by Jon Godfread (North Dakota) had a lengthy agenda and had over 600 attendees including many Commissioners. The Task Force adopted the meeting minutes from the July 23rd and 2019 Fall National Meeting and adopted its Working Group Reports: Big Data; Speed to Market; Artificial Intelligence and heard an update on the Innovation and Technology State Contacts Activity.
There was considerable discussion among the regulators (NE, CO, LA, IA, and MD) regarding the Artificial Intelligence (AI) Principles which the Task Force unanimously adopted principles for artificial intelligence which require insurers to take practice steps to avoid proxy discrimination against protected classes, consistent with the risk-based foundation of insurance. The principles will go to the Executive Committee for further deliberation.
The Accelerated Underwriting Working Group heard presentations on algorithmic auditing including Accelerated Underwriting (A) Working Group; Algorithm Auditing in Life Insurance (Deloitte); Accelerated Underwriting and Evaluating the Risks (Risk and Regulatory Consulting). The Task Force discussed Anti-Rebating Draft Model Law Amendments —Superintendent Elizabeth Kelleher Dwyer (RI) based on the July 23 Conference Call and Comments Submitted. The Task Force outlined next steps for the Development of Amended Model Law Language including an exposure.
Finally, the Task Force was updated on Data Use and Privacy Coordination and from the Privacy Protections (D) Working Group.
Updates from prior meetings are available in Gain’s growing library of resources.