The NAIC makes insurtech adoption a top priority

The National Association of Insurance Commissioners is looking to adopt some of the emerging technologies capturing the attention of insurance companies.

The organization released a new three-year innovation plan, “State Ahead: Strategy Plan 2018-2020,” aimed at equipping itself with cloud capabilities, artificial intelligence and self-service business intelligence tools--among other technologies--to store collected data, publish reports on market findings and launch proof of concepts.

A number of the mandates in the report also surround education, both for state officials and consumers. The NAIC intends to develop a new “Insure U” website as a resource for consumers to learn about insurance-related topics. Additionally, it wants to provide opportunities for state insurance regulator engagement on current issues in the insurance marketplace, including insurtech, regtech, cybersecurity and autonomous vehicles.

“The NAIC has never experienced such a convergence of forces with the potential to reshape the industry. We need to evolve with the marketplace around us, lest we be left behind,” The NAIC noted. “This is especially true of the tools and services developed and provided by the NAIC. In particular, we foresee leveraging even further the information the NAIC collects as a critical element to the future.”

In a separate report released by Deloitte in February, the consulting firm found that 54% of regulators surveyed cited insurers’ increased use of technology as a catalyst for the NAIC’s own future innovation strategy. About 60% of respondents, which included 28 of the 56 member jurisdictions and 34 regulators overall, acknowledged the NAIC is also responding to changing regulatory demands. The leading factor behind the adoption of newer technologies is the emphasis on automating manual processes, Deloitte says.

“As a former regulator, there has always been a difference among various jurisdictions, in terms of the level of resources available to innovate,” said Andrew Mais, member of Deloitte’s center for financial services practice and the study’s author.

In fact, 72% of regulators surveyed find budget constraints to be the biggest challenge to adopting new technology; followed by integration with legacy systems (56%) and lack of talent availability (40%). Mais, a former director of public affairs & research at the New York State Insurance Department, believes regulators now have the opportunity to proactively leverage tools such as social media and natural language processing to address consumer complaints ahead of time. New analytics tools can also aid in more quickly analyzing loss ratios that are higher than actuarial projections.

Finally, joint findings derived from the NAIC’s new plan and Deloitte’s research hint at a more collaborative work environment for lawmakers and carriers going forward, Mais concludes.

“The regulatory system was not previously set up for innovation. It was more for consumer protection,” he said. “These advanced systems for real-time monitoring and communication will enable that trust that is necessary. Regulators are comfortable having a sandbox, and knowing what is contained inside. They do not want any outside surprises.”