Market Conduct Analysis Statement Blanks (D) Working Group – Impacting Market Conduct surveillance – Accelerated Underwriting—putting the cart before the horse.

One of the working groups under the National Association of Insurance Commissioners (NAIC’s) Market Regulation and Consumer Affairs (D) Committee, the Market Conduct Annual Statement Blanks (D) Working Group’s goal is to collect uniform market conduct related data not otherwise available. To that end, the Blanks Working Group drafts and approves reporting Blanks and Data Call and Definitions which then are approved by the Market Regulation and Consumer Affairs (D) Committee. There are 49 states that participate in the Market Conduct Annual Statement (MCAS) filing process. The 2020 Market Conduct Annual Statement Blanks (D) Working Group was charged to:

1. Review the MCAS data elements and the “Data Call and Definitions” for those lines of business that have been in effect for longer than three years and update them, as necessary.
2. Develop an MCAS blank to be used for the collection of data for additional lines of business, where appropriate.

Through 2020, there were multiple conference calls and comment letters submitted to the Blanks Working Group on proposed changes to the life and annuity MCAS data.  The Center for Economic Justice (CEJ) has taken a very active role with the Blanks Working Group to expand the MCAS data and interrogatories. For instance, the Blanks Working Group adopted for 2021 verbatim the additional data request for lawsuits: 

New lawsuit data elements:

• Number of lawsuits open at the beginning of the period
• Number of lawsuits opened during the period
• Number of lawsuits closed during the period
• Number of lawsuits closed during the period with consideration for the customer
• Number of lawsuits open at the end of the period

The CEJ also promoted additional data elements on surrenders, replacements and the use of third-party administrators - all which the Blanks Working Group adopted for 2021 MCAS data. CEJ has been advocating the inclusion of accelerated underwriting in MCAS despite objection by ACLI and the industry and the lack of a Model adopted by the Life Insurance and Annuities (A) Committee. 

There are multiple ad hoc groups looking at Big Data, Artificial Intelligence and Accelerated Underwriting that have been meeting to respond to the insurance industry’s continued innovation and use of data and algorithms in product development, pricing and underwriting. During the 2020 summer meeting, the Accelerated Underwriting (A) Working Group moved forward on its plan to address these issues in coordination with seven other groups, committing to a draft for exposure by the end of 2020. 

Despite the Accelerated Underwriting (AUW) Working Group’s plan and lack of an exposure draft, the MCAS Blanks Working Group recently agreed to changes prompted by the CEJ.  Under significant objection by American Council of Life Insurers (ACLI), the Working Group sided with Birny Birnbaum, the CEJ’s Director, to include accelerated underwriting in the 2022 MCAS filing requirements. The Working Group did not disclose the specific elements or interrogatories, but CEJ has proposed the definition, interrogatories and data elements. 

Definition: Accelerated underwriting means underwriting or pricing or life insurance in whole or in part on non-medical data obtained from other than the applicant or policyholder and includes, among other things, facial analytics, social media and consumer credit information.

• Does the company use accelerated underwriting for life insurance? Y/N
• If the company uses accelerated underwriting for life insurance, for what product categories is it used?
•  If the company uses accelerated underwriting for life insurance, list the data sources used and vendors supplying data or algorithms.
• Data Elements: For data elements 1B-19 through 1B-27, replicate each data element for accelerated underwriting experience. For example, in addition to current 1B-20: 1B-20A:
• Total Number of New Policies Issued by the Company during the Period Utilizing Accelerated Underwriting.

The Market Regulation and Consumer Affairs (D) Committee still has to approve the Blanks Working Group. The industry should object to including accelerated underwriting in the 2022 MCAS given that no exposure draft has been promulgated by the AUW Working Group based on the CEJ’s agenda. The result is putting the cart before the horse.