On Friday, October 26, 2018, Insurance Commissioner Gary D. Anderson addressed attendees at the Massachusetts Association of Insurance Agents (“MAIA”) Big Event luncheon sponsored by the Arbella Mutual Insurance Company (“Arbella”).
The luncheon guests were welcomed by Nicholas A. Fyntrilakis, President & CEO, of the MAIA, Following Mr. Fyntrilakis, Commissioner Anderson was introduced by John F. Donohue, the CEO of Arbella.
In introducing Commissioner Anderson, Mr. Donohue spent a few moments putting the commissioner of insurance’s job in perspective. To Mr. Donohue, the position was “one of the most challenging jobs in the entire government of Massachusetts.”
Mr. Donohue noted that the Commissioner has five separate constituencies that he has to answer to every day: the Governor, the legislature, consumers, insurance agents, and insurance companies, and “it would be a very rare day that all five of those constituencies would agree on anything.”
Mr. Donohue praised Commissioner Anderson because of his “incredible job” and because he accomplished this in a “very quiet, under-key sort of way.” He illustrated this point by telling the audience about the Commissioner and his team’s recent quiet but proactive efforts in the Merrimack Valley to help people affected by the Columbia Gas tragedy with their insurance issues.
Finally, before introducing the Commissioner, he praised him for his attracting and retaining “an incredibly talented team of people.” that is one of the best elements of the division that we work within the 30 years we have been in business.
After a round of applause for Mr. Donohue’s introduction, the Commissioner spoke about a number of issues affecting both the Massachusetts and national insurance market. Agency Checklists believes the following transcription is a substantially accurate rendition of the Commissioner’s statements, however, in some cases, it has been lightly edited for clarity. Also, the section headings are insertions by Agency Checklists to segment for our readers the topics of the Commissioner’s discussion.
Commissioner thanks the MAIA for the opportunity to speak about issues affecting all
Well, first I just have to tell you that I was going through the speech last night when I was at home, and I fell asleep. [loud laughter] So, I guess this is my forewarning. John, thank you for the kind introduction, it was very nice. Thank you.
I am very pleased to be here today at this annual gathering of the MAIA membership and to play a part a session that has made this such a successful conference, year in and year out.
For many of you, your interaction with the division of insurance is likely renewing your license or filling your continuing education requirements. So, it is a pleasure for me to interact with you in a forum. It is different to have the opportunity to discuss the issues that we are all facing in the insurance marketplace.
I am a little disappointed, however, that I will not be able to attend the session tomorrow, entitled “Line Dancing, Let’s Dance.” [Laughter]. Even though I was born in Idaho, that has escaped me. [Laughter].
Hoping to continue the dialog with MAIA and its membership
Before I launch into some of the issues, I would like to thank Nick and his team for their partnership and collaboration on so many issues. Thank you, Nick.
Last year the Governor, at this podium, discussed the importance of working together to solve problems. Over the past two years at the Division, I am really proud of the approach that we have taken to find the best solutions to some of the very tricky issues that we face. And I don’t think we would have been able to accomplish this without honest conversations and affording others the respect that they are due. So, I look forward to continuing this tradition with Nick and the MAIA membership.
Joe Leahy congratulated on Big “I” Chairmanship
I would also like to take just a brief moment to congratulate Joe Leahy on being named Big “I” Chairman. An impressive accomplishment and, as Nick rightly noted during his swearing-in ceremony; it is the achievement of a lifetime of service. Congratulations.
The Massachusetts insurance market, healthy and serving the needs of insurance consumers
I would like to share just a recent example for the partnership that we are building with Nick and you all. I reached out to him to discuss the unfortunate occurrence in the Merrimack Valley, as John prefaced.
Actually, before I start down this path, let me just back up for a minute to note that Massachusetts has a very healthy insurance marketplace. It is an over $50 billion industry in this state. We’re consistently right near the top ten among the 56 states and territories with respect to premium written by carriers. At the Division, we have financial compliance oversight of approximately 1,700 insurance companies and roughly 140,000 producers, and there are approximately 85 domestic carriers. Those numbers represent the big picture, and they contribute a lot to the economy of the commonwealth. I know I have said this often, but as we all know, insurance is intimate and that it touches each of our lives in a very personal way. This is demonstrated by the over 20,000 inquiries that we receive annually in our consumer services unit. And the roughly 40,000 surcharge appeal hearings that are held every year by our Board of Appeal at locations across the commonwealth.
Commissioner thanks individuals who assisted at his public sessions in the Merrimack Valley
So to further drive home this point about insurance being intimate, I will return to the conversation that Nick and I had. And, I mentioned to Nick that we would be holding some public sessions on the topic of insurance in the Merrimack Valley. He kindly offered to touch base with some local agents and let them know. So, I just want to say thanks to those several folks who showed up: Mike Pangione was a board member who attended the sessions in Andover and North Andover; Trudy Lawler who attended the session in Lawrence; and Sheila Doherty from Andover for attending the Andover session, and who also serves as the Andover Town Moderator. Your support was and is genuinely appreciated. [Appluase].
How insurance agents are assisting consumers with Columbia Gas claims
The situation in the Merrimack Valley is unique in comparison to some of the other disasters that we have experienced. In this situation, we have an entity, Columbia Gas, that is claiming responsibility. Therefore, many folks may not be filing insurance related claims. But, what I took note of, was the way each these producers help to guide their clients through the process whether these clients were filing insurance claims or claims with Columbia Gas. And, this is what I mean by intimate. It is when our time of need arises that these products can lend a helping hand and this is the value of the agent-client relationship. [Applause].
I view this opportunity as my way to be a voice for you, the producers of Massachusetts. Commissioner Anderson on NARAB board appointment.
This kind of relationship is what I enjoyed with my own agent. He knows me; he knows my wife, he knows our son, what we drive, where we live, he assures me he is not a stalker. In all seriousness, it is that kind of knowledge that he has of my family, that helps him to anticipate potential exposures.
The challenges and opportunities for insurance innovation
So, with that kind of value that you provide kept in mind, I would like to discuss one challenge and an opportunity for all of us, and that is innovation. Innovation in insurance is receiving a lot of attention in industry forums, publications by NAIC. There is definitely a significant buzz around this topic, and the possibilities are really intriguing.
There is potential to improve the consumer experience, and maybe that’s through an app. Maybe it makes the underwriting process quicker and less cumbersome. Or maybe it’s improvements in the claims process.
There is also advanced data analytics and algorithms. However, it is a bit difficult to sort through all of this to tell and what’s hiding and what’s the real promise of added value.
So, what is the challenge for other regulators and me? There are a couple of primary goals as I see it. One is to ensure that the laws and regulations are applied fairly and consistently across the market and to make sure that the consumer is protected from those who seek to abuse the system. We take those charges very seriously. However, we also want and need to be open to innovation that offers promise to deliver real value to the consumer. This is an extremely tricky balance. Our approach in this effort has a few elements.
We don’t want to claim the rigid requirements solely for the sake of maintaining the status quo. We want to be flexible and collaborative within the bounds of our statutes. We want to engage with innovators early on as they develop strategies that may bump up against bureaucracy. And, I recognize that coming into the regulator early on in the process is not an easy proposition to accept because there is a threat to being told “no.” But, that noted, if the concept of a product is truly an innovation that brings value to the market and the consumer and there is a reasonable case to be made, I believe that it is our goal to find a viable solution.
Division to work with NAIC and other state regulators to gain big data capacity
Another challenge for us is to gain an understanding of the key elements within those complex data models and algorithms. As John said, I am not a number cruncher; I am a lawyer, so that would not be me. And we don’t employ data scientists within the DOI. But what we need to know is it works and what it does for us to determine if it complies with the laws and does it involve discriminatory or illegal practices. This is consistent with our mission of consumer protection.
Over the past few months, there have been coordinating efforts on this front with other regulators. And through the NAIC, we have been exploring options for additional resources to support same base regulation and ways to streamline that process that can help bring valuable products to market.
Recent examples of innovative products
So, what does all of this mean for you? Well, we have seen a couple of fairly recent examples of innovative products hitting the market, and when they do, they provide opportunities for you all to offer a more tailored product to your clients. Uber was certainly a market disruptor—a new innovation. And on the insurance aspect of this innovation, once the framework was built into the law with regard to how this industry would be regulated, what we saw were the insurance carriers who operate in this market quickly began developing and offering products. Often as endorsements to the traditional private passenger on a policy. What this did is provided you opportunities to operate with these carriers and clients in that field.
We also recently approved a life insurance product that provides the traditional elements of life insurance but also offers benefits on the health side with savings and rewards for healthier living. This type of product may appeal to all demographics and includes elements that include wearables to track performance.
A piece of innovation is also figuring out how to provide products to some of the underserved populations. A very good example of this is how an agency saw an opportunity of underserved coastal areas and formed a partnership to bring a new carrier to the Massachusetts market. The agency through its partnership with this carrier is now able to offer traditional coverage options to homeowners in coastal areas.
So there are clearly some challenges that we will face within innovation, but there are definitely exciting possibilities as well. And, innovation can take a number of forms. As I mentioned a few minutes ago, part of innovation is creating streamlined processes.
Asked about serving on national broker licensing clearinghouse committee
As many of you know, in the last 20 years there have been efforts to improve uniformity and reciprocity in traditionalized systems. In 2015, a new federal law was enacted, specifically aimed at the non-resident, producer licensing process. It is known as NARAB or the National Association of Registered Agents and Brokers. NARAB requires a national clearinghouse to streamline market access for non-resident insurance producers. Therefore, eligible insurance producers will be able to seek non-resident authority through NARAB membership rather than having to go state by state to get state-issued licenses. And discriminatory state laws, regulations, and actions were subject to pre-emption. So, the clearinghouse will be overseen by a board of 13, four which appointed by the President and then subject to Senate confirmation. The 13 board members will consist of eight insurance commissioners with political party balance and five ministry representatives and will be responsible for the adoption of the initial by-laws, etc.
So, they asked me about serving as one of those board members. I view this opportunity as my way to be a voice for you, the producers of Massachusetts. And, I do think that together we can create efficiencies within our market.
Innovation is not a zero-sum game
So, innovation is bound to create some uncertainties for all of us in this system, but the good news is, innovation doesn’t have to be a zero-sum game. For one to succeed, another does not have to fail.
I look forward to tackling these opportunities with you and the membership of MAIA. Again, thank you for having me here this afternoon. I hope you enjoy the rest of your conference. [Protracted appluase].