April 30, 2021

NAIC Issues Recommendations to Support Racial Equity

The National Association of Insurance Commissioners’ (NAIC) Special (EX) Committee on Race and Insurance met during the virtual Spring National meeting on April 12 to discuss its recently proposed 2021 charges. The lengthy and ambitious charges are a compilation of recommendations from the special committee’s five workstreams and a reflection of the NAIC’s commitment to racial equity in insurance.

The first two workstreams are examining diversity, equity and inclusion (DEI) within the insurance industry and the regulator/NAIC community. Both workstreams will continue looking at ways to increase DEI. Specifically, they plan to engage with the industry to learn about successful strategies to attract and retain employees from underrepresented communities (Workstream One), collect information from and identify best practices within state insurance departments and examine ways the NAIC can support those efforts (Workstream Two).

The workstreams focusing on specific lines of business produced the biggest headlines in the proposed charges. Assuming the charges remain largely unchanged, here’s some of what we can expect in the coming months:

Property & Casualty Insurance (Workstream Three):

  • Research and analysis by the Center for Insurance Policy and Research on the affordability of auto and homeowners insurance, the availability of producer licensing exams in foreign languages, steps vendors have taken to mitigate cultural bias and the number and locations of producers (by company) compared to demographics in the same area
  • The development of analytical and regulatory tools to assist regulators in addressing unfair discrimination, including consideration of socioeconomic variables, proxy variables for race, correlation vs. causation, disparate impact issues, third party data and criminal history
  • Coordination with the Casualty Actuarial and Statistical (C) Task Force and Big Data and AI (EX) Working Group on issues related to artificial intelligence, pricing algorithms, and risk modeling with a focus on how race is impacted

Life Insurance and Annuities (Workstream Four):

  • Continued research and analysis of marketing, distribution and access issues, including the role of financial literacy, the impact of traditional underwriting, disparities in the number of cancellations and rescissions and other related issues
  • An assessment by the Accelerated Underwriting (A) Working Group on how/whether the use of external data and data analytics in accelerated underwriting impacts marginalized populations

Health Insurance (Workstream Five):

  • Research and analysis of measures that would advance equity by lowering the cost of health care
  • Examination of the use of network access and provider directory measures to promote equitable access to culturally competent care
  • Evaluation by the Health Innovations (B) Working Group of mechanisms to resolve disparities through improved access to care, including with the use of telehealth, alternative payment models and value-based payments
  • The development of educational materials for state insurance departments, and research on disparities in mental health parity and access to culturally competent care by the Mental Health Parity and Addiction Equity Act (MHPAEA) (B) Working Group

P&C/Life and Annuities/Health:

  • Consider enhanced data reporting and record-keeping requirements across product lines to identify race and other sociodemographic factors of insureds.

Interested parties offered both support and criticism for the charges during the meeting. Regulators called on insurers to submit comments containing more specificity on suggested changes to better help the NAIC collaborate with industry. In his closing remarks, Director Dean Cameron (NAIC President-Elect – ID) urged insurers to step up so that consumers can be confident that they are being protected from intentional and unintentional discrimination.

Comments on the proposed charges are requested by May 14.

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