Best’s News & Research Service - May 09, 2016 04:43 PM (EDT)
Insurance Groups Seek Confidentiality, Clarity in NAIC Big Data Draft Recommendations
WASHINGTON //BestWire// - Insurance groups are asking a National Association of Insurance Commissioners’ working group to provide confidentiality against consumer group calls for open information about how data is being used to determine insurer rates.
The debate is taking shape in the early meetings of the NAIC’s Big Data working group, which has been charged with exploring insurer big data use in claims, marketing, underwriting and pricing; and exploring opportunities for regulatory use of big data to boost efficiency and effectiveness of market regulation. The working group is getting responses to a new draft discussion document as a first step to making recommendations during the NAIC Fall National Meeting this December in Miami for the full Market Regulation and Consumer Affairs Committee to consider as charges to address during 2017 (Best’s News Service, April 5, 2016).
During the May 9 conference call, insurers voiced concern about a proposal offered by Birny Birnbaum, executive director of the Center for Economic Justice.
Birnbaum told Best’s News Service he is pressing for a recognition that use of big data — an example being price optimization — represents a sea change in how insurers deal with consumers and interact with regulators. He said it changes the regulatory framework insurers have faced for 40 years and argued regulators are no longer able to independently verify the prices and the data being used to justify them because the models and those making them could be biased.
David Snyder, vice president, international policy at the Property Casualty Insurers Association of America, told Best’s News Service Birnbaum’s proposal “would open up virtually every aspect of regulation and make it extremely difficult to find the right balance between transparency and confidentiality.” He said the PCI supports the effort by working group Chairwoman Laura Cali, Oregon insurance commissioner, to “move forward in a deliberate and organized fashion.”
Snyder said there likely will be a more detailed work plan developed by the working group before it hosts what is expected to be a well-attended meeting in Kansas City on May 19.
Snyder said Birnbaum’s proposal was based on the assumption more data submission and changes in laws and regulations are necessary. “Let’s determine there is a problem before you try to solve it,” Snyder said. He said the PCI is interested in working to inform regulators about big data. It is not interested in giving trail lawyers more data to use against the industry and regulators.
Lisa Brown, senior counsel and director, compliance resources at the American Insurance Association, said Birnbaum’s plan would be ripe for consideration if the working group finds it is first appropriate to recommend the 2017 charges to the full committee. Brown said the working group should define “big data” before expanding its work. “We’re not suggesting a specific definition,” she told the panel.” We are simply asking that one be settled on before the group moves on.”
Paul Tetrault, state and policy affairs counsel at the National Association of Mutual Insurance Companies, told the panel a clear definition of “big data” was necessary for insurers to help move the working group’s efforts forward. “If we go ask insurers for information, the response from them would be ‘What information are we talking about?’” Tetrault’s written comments to the panel said the working group should either develop a working definition of “big data” for the working group’s purposes or use different and precise language.
He wrote initial language involving the discussion of “insurers’ use of big data in rating and underwriting” involved the use of sensitive and proprietary information. Any request for information regarding an insurer’s use of data in rating and underwriting “must acknowledge and support an insurer’s claim of confidential status for the data.”
(By Thomas Harman, Washington Bureau manager, BestWeek: Tom.Harman@ambest.com)