Diversity, Equity, and Rebating
The National Association of Insurance Commissioners (NAIC) and the National Conference of Insurance Legislators (NCOIL) recently wrapped up their respective spring meetings—the NAIC still virtual and NCOIL braving it in person.
The pandemic forced most of their work to a standstill, and these meetings really were focused on ramping back to regular order. Two noteworthy exceptions to the agenda, however, warrant attention.
In December 2020, the NAIC adopted a set of Unfair Trade Practices Act rebating reforms for which The Council has been advocating for many years. NCOIL had adopted a similar set of reforms in March 2020.
Notably, under both models, producers may offer value-added products or services at no or reduced cost even when they are not specified in the insurance policy if those products/services “relate to” the insurance coverage and are designed or intended to further certain insurance-related goals. Under the NAIC model, for example, products/services may be designed to provide loss mitigation, post-loss services, education about risk of loss, or administration of employee or retiree benefit coverage. Similarly, under NCOIL’s approach, products/services are permissible if they are intended to educate about, assess, control, mitigate, or prevent risk of loss or if they generally “have a nexus to or enhance the value of the insurance benefits.”
Both models also permit giving non-cash gifts to clients in connection with marketing, selling or retaining insurance contracts. Neither model puts a strict limit on the value of such gifts, but both “suggest” $250 as a maximum amount—a significant improvement over some double-digit value restrictions in place today.
Legislation to implement the NAIC model has been introduced in several states and already has been enacted in New Mexico and North Dakota. The Council is working with other industry trade groups to support broader adoption of the modernized model.
DE&I Permeates Discussions
Diversity, equity and inclusion (DE&I) discussions came to the fore in the wake of the George Floyd tragedy. NCOIL is focusing its DE&I efforts on addressing any underwriting-related “proxy discrimination” (i.e., utilizing facially neutral factors as stand-ins—or proxies—for discriminating factors).
The NAIC, in contrast, has taken a much broader approach by forming five separate workstreams within its Special Committee on Race and Insurance: industry, NAIC/state insurance departments, P&C, life, and health. Some of the early workstream effort is directly relevant to the broker community, including the following:
- The industry workstream is analyzing and developing specific recommendations for improving DE&I across the industry and for measuring industry participant DE&I.
- Multiple workstreams will examine potential legal and regulatory approaches to addressing different kinds of unfair discrimination (e.g., proxy, disparate impact, and use of third-party data) in different lines of insurance and are considering new reporting requirements to identify race and other sociodemographic information about insureds.
- The health workstream will study measures to advance equity in the cost of, and access to, healthcare and the potential use of network adequacy requirements to promote culturally competent care.
Several NAIC standing committees also are undertaking DE&I initiatives. The Producer Licensing Task Force, for example, intends to evaluate offering licensing exams in foreign languages, how cultural bias can be minimized by exam vendors, and how the number and location of a company’s producers compares to the demographics of the areas in which they are (and are not) operating.
The dominance of DE&I goals and concerns is, however, more far-reaching. There are noticeable efforts by legislators and regulators in every policy discussion to consciously address the policy’s potential impact on race, equity and inclusion. NCOIL, for instance, amended its recently passed Distracted Driving Model Act to address potential discrimination concerns related to distracted driving stops. And telehealth discussions at both the NAIC and NCOIL meeting included questions about whether telehealth tools might be used to expand access to underserved communities or could exclude those who do not have access to adequate technology from taking advantage of those services.
Individual insurance departments and industry participants also are getting on the DE&I train, at least partly in response to stakeholder (including investor) demands for DE&I progress and results and to a corresponding frustration with the lack of actionable data and guidance. The New York Department of Financial Services insurance division, for example, worked with the carrier community to craft a non-prescriptive circular letter clarifying the expectation that insurers operating in New York will make diversity a business and corporate governance priority and, for larger insurers, establish new board and senior management diversity data reporting requirements, which it intends to publish on an aggregate basis. The goal is to provide tools to evaluate how companies stack up against industry averages. The department also plans to host “best practices” training in the near future, also in response to insurer requests.
May 25, 2021, will mark one year since George Floyd’s murder, an event that sparked worldwide protests, conversations and debates on the topic of race. The industry and our regulators are engaging in this topic by conducting meaningful dialogue with diverse stakeholders and spending real time and effort analyzing policy and business choices through the DE&I lens. For both rebating and DE&I, significant strides toward real reform have been taken during an otherwise moribund (at least with respect to NAIC/NCOIL developments) pandemic, but both those journeys are far from done and there undoubtedly will be more to come.