The annual meeting of the National Council of Insurance Legislators brought 345 attendees from across the country to Columbus, Ohio, for a varied discussion of topics ranging from artificial intelligence to third-party litigation funding. Fifty-two legislators from 25 states also attended, as well as seven insurance commissioners and representatives from nine other departments of insurance.
The meeting produced more in the way of ongoing dialogue on issues that will carry over into 2024 rather than specific actions impacting the property/casualty insurance industry, such as adoptions of new model acts.
As usual with the fall annual meeting, one of the most notable portions of this meeting was the announcement of NCOIL’s 2024 slate of officers. Unlike in recent years, where the pandemic and legislative departures resulted in changes to the normal rotation of NCOIL officers, the 2024 slate included less suspense. Rep. Edmond Jordan, D-La., joined the officer slate as secretary; with his addition, the following slate of officers will serve in 2024:
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Rep. Tom Oliverson, R-Texas, President
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Assemblywoman Pamela Hunter, D-New York, Vice President
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Sen. Paul Utke, R-Minn., Treasurer
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Rep. Edmond Jordan, D-La., Secretary
Rep. Deborah Ferguson, D-Ark., will be immediate past president in 2024. Ferguson is also not running for reelection to the Legislature next year.
Please see detailed reports on these topics:
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Property & Casualty Committee
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General Session on Third Party Litigation Funding
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General Session on Artificial Intelligence
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NCOIL Special ESG Series: Governance
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NCOIL/NAIC Dialogue
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Workers’ Compensation Committee
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Financial Services and Multi-Lines Committee
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Life Insurance & Financial Planning Committee
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State & Federal Relations and International Insurance Issues Committee
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Executive Committee
Property & Casualty Committee
The Property & Casualty Committee continued discussions on several proposed models, specifically Catalytic Converter Theft Prevention Model Act; the existing State Uniform Building Code Model, with potential changes related to disaster mitigation; and the Public Adjuster Professional Standards Reform Model Act.
The conversation on the Catalytic Converter Model centered on whether the model was sufficiently related to insurance to merit further consideration by NCOIL. The proposed model would provide criminal penalties for catalytic converter theft, along with other provisions. The committee did not reach a decision on how to move forward and will likely make that decision in early 2024; there was some discussion of adopting a resolution regarding the issue rather than a model act.
The committee continued its work to develop policy for states to incentivize property owners to mitigate against natural disasters. Rep. Jim Dunnigan, R-Utah, began the discussion by withdrawing his originally proposed amendments requiring mandatory discounts on property insurance for certain mitigation efforts and stated his desire to look to alternative policy ideas to “move the needle” on mitigation efforts in the states.
NAMIC had encouraged the withdrawal of the mandatory mitigation discount proposal. In lieu of this proposal, the committee re-adopted the existing NCOIL Building Code Act, with some technical amendments, an action that NAMIC supported.
To help the committee consider other approaches, Tom Travis, deputy commissioner at the Louisiana Department of Insurance, provided an overview of the recently launched Louisiana Fortify Homes Program, which provides grants to retrofit existing homes with the Institute for Business & Home Safety’s FORTIFIED roofs.
NAMIC will continue to be engaged on the mitigation and resiliency issues as NCOIL likely continues conversations around these issues in 2024.
The committee also held its third round of discussion on the Public Adjuster Professional Standards Reform Model Act, sponsored by Rep. Michael Meredith of Kentucky. His interest in an NCOIL model began after the state experienced abuses and unscrupulous behavior by public adjusters after recent severe weather events, revealing a need for stronger laws. The original model was based on a bill passed in Kentucky in 2023.
NAMIC spoke in support of this model, noting the improvements since the committee’s consideration of it in July. A representative of the National Insurance Crime Bureau also spoke in support of the model law, specifically the provisions addressing the public adjuster conflict of interest/financial interests in the companies performing repair work. The American Association of Public Insurance Adjusters spoke to the model and offered amendment suggestions that would make the fee cap in the model “optional” and create exceptions to the conflict-of-interest provisions. Members of the committee expressed support for the model in its current form. NAMIC will continue to encourage adoption of the model at the earliest opportunity and in as strong as form as it currently stands.
To conclude its work, the committee considered and adopted amendments to the Delivery Network Company Insurance Model Act. The proposed amendments clarify the definition of “delivery available period” and make some other technical changes. The committee adopted the amendments unanimously.
General Session on Third-Party Litigation Funding
NCOIL’s signaled potential renewed interest in a third-party litigation funding model with a final-day general session on the topic. Generally speaking, TPLF involves investments in litigation by entities that have no other direct interest in that litigation. NCOIL discussion on a model law nearly a decade ago broke down between competing proposals to meaningfully regulate the practice and those pushed by litigation funders themselves to require registration and minimal oversight.
Rep. Matt Lehman of Indiana led a panel discussion, noting the history of contention over TPLF regulation at NCOIL and highlighting legislation he passed in Indiana last year to require disclosure of TPLF agreements for “consumer” TPLF – namely, those agreements made with individual plaintiffs rather than business-to-business “commercial” TPLF – or other sophisticated arrangements involving selling interests in a portfolio of cases. In these latter arrangements, the plaintiffs involved may not be parties to or even aware of the TPLF’s role in the case.
Much of the panel’s discussion focused on contrasting the issues with consumer TPLF and commercial TPLF, with notable disagreements among the panelists about how important those distinctions are. The academic panelist, Professor Maya Steinitz of Boston University School of Law, suggested that the distinctions were perhaps overblown and pointed to a robust TPLF regulatory regime being considered by the European Union. This regime would ensure plaintiff, rather than funder, control of cases, establish a fiduciary duty of the funder to the plaintiff, set a minimum 60 percent recovery amount the plaintiff must retain (as an alternative to other efforts to cap TPLF interest rates), require disclosure, and prohibit funders from withdrawing funding as a means to control cases.
The two TPLF proponents on the panel claimed to represent only consumer financers and emphasized their view that this sort of financing did not encourage litigation and simply “levelled the playing field” for plaintiffs who may otherwise face financial pressure to settle. Notably, neither of these TPLF proponents agreed with a disclosure requirement, either.
Rep. Edmond Jordan of Louisiana voiced further disagreement, arguing that a requirement to disclose TPLF would disadvantage the plaintiff in the suit by revealing potential financial difficulties. Jordan currently chairs the NCOIL’s Property/Casualty Committee, one of the committees that could consider a TPLF model.
The closest to an agreement the panelists and the interested legislators came was a concern about potential foreign investment in TPLF, particularly by actors with potentially nefarious motives beyond simply profiting from litigation.
Lehman indicated he planned to offer a model on TPLF at the NCOIL spring meeting in April. NAMIC supports a disclosure requirement for TPLF agreements as well as robust regulation of all types of TPLF.
General Session on Artificial Intelligence
The meeting’s initial general session focused on what all participants acknowledged was perhaps the hottest public policy “buzzword” topic of 2023: artificial intelligence. Oklahoma Rep. Forrest Bennett moderated the panel, which included Maryland Insurance Commissioner Kathleen Birrane as well as a representatives from the Cyber Practice group at Marsh, the Cybersecurity Practice at the Chertoff Group, and an elder law advocacy center from Wisconsin. Commissioner Mike Conway of Colorado was scheduled to attend but was unable to do so due to illness.
Rather than any unified theme regarding artificial intelligence, the panelists focused on different aspects of the AI discussion. Birrane focused on the National Association of Insurance Commissioners’ proposed Model Bulletin on the Use of Artificial Intelligence Systems by Insurers. She emphasized that in her view regulatory guidance should focus on how existing law should apply to the use of AI, that insurers have always used data to make predictions, and that AI is simply an advancement of that process. Also of note, NCOIL sent a letter in September to NAIC encouraging the bulletin to focus on guidance regarding existing law.
The remaining panelists addressed a wide range of AI issues. The Marsh panelist emphasized that the recent shift in focus on AI is that the AI/human relationship is no longer one-way; rather than humans simply instructing AI, AI can now interact with humans in a much more “human-like” manner. She also noted the risks of AI “hallucinations” – AI mistakes that can occur either through human users asking AI for information outside the AI’s “training” or situations where AI tries to infer patterns where none exists. The Chertoff panelist focused on security and other AI-related risks. He referenced three specific areas of risk: weaponization of AI through uses like “deepfakes,” targeted use of AI through things like Twitter bots, and unintended consequences in either the inputs to or outputs from AI. The elder law panelist focused specifically on how AI-generated determinations of medical necessity could harm patients. At this time, there is no indication of a pending NCOIL model related to AI issues.
NCOIL Special ESG Series: Governance
This was the final scheduled meeting in the three-part NCOIL Special Environmental, Social and Governance Series, this one focused on the governance portion of the ESG framework. Panelists included George Nichols of the American College of Financial Services, Roosevelt Mosley of Pinnacle Actuarial Resources, Jim Copland from the Manhattan Institute, and Hughey Newsome of the Piston Group.
All panelists talked about the role that governance plays in business strategy. There was also significant discussion on disclosure and transparency and the need for both. The panelists agreed that discussions on ESG, pro and con, are not a “fad,” the issue is not going away, and companies are looking to find a balance between their responsibilities to shareholders and responsibilities as corporate citizens and part of the community. There was also some agreement among the panelists that some factors that might be labeled as ESG considerations, particularly in the governance realm, might also clearly impact financial results so as to render them less controversial.
Several legislators and panelists also noted that there is a difference between the public and private sectors when it comes to ESG. Many legislators agreed that they have a role in directing ESG policies and investments at the state level when dealing with pensions and state funds but were less sure about their role in dictating private-sector investing. This distinction could be instructive to future industry advocacy around ESG issues. Oklahoma’s Bennett also raised concerns specifically about the oil and gas industry being discriminated against; in his view, this issue was exaggerated in his home state in support of an anti-ESG bill.
It is unclear whether NCOIL will proceed with an ESG conversation beyond these three panels. Participants have often described the issue as too partisan to produce a unified model; there has also been some conversation around NCOIL considering two ESG model laws: one pro-ESG and one anti-ESG. Whatever direction NCOIL heads on this issue, NAMIC will remain engaged in support of the needs of a well-functioning property/casualty insurance industry.
NCOIL/NAIC Dialogue
The standing NCOIL/NAIC dialogue item was attended by regulators Jim Donelon of Louisiana, Glen Mulready of Oklahoma, Sharon Clark of Kentucky, and Maryland’s Birrane. Ferguson chaired the session.
They began the meeting by covering NCOIL’s and NAIC’s recent D.C. fly-ins. Both groups mentioned that they stressed the importance of state-based regulatory system as well as reauthorizing the federal flood insurance program when meeting with Congress.
In other specific discussion items:
NAIC Consumer Privacy Model: Ferguson noted that industry and legislators have met the model with significant concerns. Birrane noted that NAIC’s H Committee has extended consideration for this model through 2024. She said that the working group is considering all concerns and changes and plans to create a “2.0” draft of the model.
NAIC AI Model Bulletin: Birrane addressed the work on the AI bulletin and indicated that the priority was focusing on getting the definitions correct. She also stressed that this could be a first step and that the NAIC felt it needed to “act now” and a bulletin was the fastest way to do so but a future model law on AI is not out of the question. She talked about the concerns with AI systems that create “adverse consumer consequences,” and the committee is focused on defining terms while attempting not to conflict with current statutes. Several legislators asked questions about how the model bulletin addresses transparency, discrimination, and bias; Birrane stressed once again that this is not the last work on AI.
Activities of the NAIC SVO: as a follow-up on the Securities Valuation Office presentation to NCOIL life insurance and financial planning committee, participants asked commissioners for more detail about the SVO’s activities dealing with ratings on certain investments. Donelon said that the NAIC is worried about “rating shopping” and that companies could pay rating agencies for better ratings. He noted there are several new proposals from the SVO, including one that would allow state regulators to question certain ratings. There was quite a bit of back and forth between the groups specifically about whether the NAIC is trying to become a rating agency. While Donelon denied any intention to compete with rating agencies, this assurance did not seem to quell legislative interest in this issue.
NAIC Property Insurance Market Data Call: Chair Ferguson asked about the data call, and any communication between the Federal Insurance Office and NAIC. Oklahoma’s Mulready began by talking about the struggles the market is facing, from increased storm severity and frequency to the loss of reinsurance capital. He indicated that the NAIC’s data call is to help regulators better understand coverage gaps as well as to look at affordability and availability. As to FIO and its related data call, he said that there was little communication between his state agency and FIO and that the timeline in FIO’s request was wholly unreasonable. There was robust discussion about FIO’s role, including its purpose and the expanding role it plays in federal overreach in the insurance industry.
Workers’ Compensation Committee
The Workers’ Compensation Committee discussed the impacts of the ever-increasing legalization of medical and recreational marijuana in the states – a fitting topic in this venue, given that Ohio voters approved a recreational cannabis initiative just a week prior. Derek Jones, from the American Academy of Actuaries, outlined three themes discovered through interviews with third-party administrators, lawyers, claims professionals, loss control specialist, and actuaries. The themes identified are: (1) Jurisdiction – how federal laws interact with state laws that compel reimbursement for the cost of medical marijuana and whether or not it is a crime; (2) Proximate Cause – was the use of marijuana, medical or recreational, the cause for an employee injury; (3) Correct Treatment – determining the appropriate treatment and the use of medical marijuana in a treatment plan.
Because the impacts of legalization efforts in the states are still emerging issues, there is little case law to provide guidance for marketplace participants. Of particular interest was the interaction between differing state and federal laws with respect to legalization and how those can impact employment law/policy and drug testing.
The committee also heard from Michael Choo, chief medical officer at Paradigm, who provided an overview of the trends and future of medicine in the workers’ compensation marketplace. The highlights included the impact of long COVID on claims, decreasing claims frequency, and an increase in the severity of claims. Since 2020, long COVID claims have continued to decrease, in large part due to availability of vaccines and treatment and the continued mutation of the virus to less severe strains. In recent years claims frequency in general has declined, but the severity of the claims has continued to increase, up 6 percent from 2021-2022.
Finally, the committee had a brief discussion on federal workers’ compensation issues, specifically continued efforts at the federal level to cost shift to the workers’ compensation marketplace from government programs, such as Social Security, SSDI, Medicare/Medicaid.
No model laws were up for adoption or re-adoption during the meeting.
Financial Services and Multi-Lines Committee
This committee’s agenda included two items of potential interest to property/casualty insurers. The first was adoption of the NCOIL Resolution in Support of Establishing National Standards and Procedures for Reporting and Payment of Premium Taxes Due as a Result of Direct Procurement. Proponents of the resolution described it as providing a narrow clarification on the methodology for paying premium taxes in direct procurement situations.
The committee also heard a presentation on the effects of inflation on the insurance market by Professor Douglas Ruml of Ohio Dominican University. Ruml outlined four ways inflation impacted insurers specifically. These were: general inflation, which results in premium payments not going as far as they had due to the diminished value of money; claims cost inflation, which affects areas like home repair, auto repair and labor, microchip shortages; and broader issues like social inflation; wage inflation, which affects insurers as it does other employers; and interest rates, which impacts both insurer investments and their own bond issuances.
Life Insurance & Financial Planning Committee
The Life Insurance & Financial Planning Committee continued the discussion on the U.S. Department of Labor Fiduciary Rule. NCOIL opposes the proposed rule as it is a threat to state-based regulation and the existing NAIC Suitability in Annuity Transactions Model Regulation that addresses conflicts of interest in the promotion and sale of annuities in the states.
The final panel of the committee meeting discussed the NAIC’s SVO’s efforts to gain more authority over ratings for certain investment assets. Beth Dwyer, director of the Rhode Island Department of Business Regulation, Division of Insurance, outlined the Framework for Insurer Investments with the stated purpose to effectively use regulatory resources to regulate insurance investments. Citing a “blind reliance” on credit rating providers, the SVO is seeking ways to provide regulators tools to properly evaluate and value insurance company investments. Several legislators expressed concerns with the proposals, specifically on regulatory overreach if the SVO has the ability to overrule CRP ratings. NAMIC submitted comments to the NAIC in July raising other concerns that were also mentioned by NCOIL legislators, including additional insights on the proposed overall process, fees associated with additional review, and the uncertainty of the appeals process.
No model laws were up for adoption or re-adoption during the meeting.
State & Federal Relations and International Insurance Issues Committee
The committee heard three presentations on a range of issues from ERISA preemption, FEMA/National Flood Insurance Program initiatives, and Mental Health Parity and the Affordable Care Act.
Of interest to NAMIC members, David Maurstad, FEMA’s assistant administrator, gave the committee an overview of recent initiatives by FEMA and the NFIP. FEMA continues to work to close the “flood insurance gap”; it is estimated that only 4 percent of homeowners nationwide have a flood insurance policy. Since 2016, the private flood market has increased by more than 20 percent, from 18 companies writing flood insurance policies in 2016 to 77 companies in 2022. FEMA/NFIP’s efforts include offering installment plans and promoting Community Rating System programs to incentivize flood mitigation in participating communities. Ultimately, a congressional long-term funding reauthorization of the NFIP remains a pressing need.
No model laws were up for adoption or re-adoption during the meeting.
Executive Committee
In addition to announcing the 2024 officer slate, the Executive Committee took the following actions:
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Allowing the NCOIL Model Act to Support State Regulation of Insurance Through More Informed Policymaking, originally adopted in 2018, to sunset; the model was subject to review on the regular five-year NCOIL review cycle. The justification was that the model had not been adopted in any state;
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Adding two new members: Rep. Brian Lampton of Ohio and Assemblyman Jarett Gandolfo of New York; and
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Approving all the models that were adopted or re-adopted by other committees during the meeting.
Finally, the committee adopted a recommendation of the articles of incorporation and bylaws revision committee to limit the number of legislators from a single state who could vote on a model to four. The changes also outline the process by which states determine the four legislators from each state who are eligible to vote in the event more than four wish to do so. Other approved bylaw amendments reduced the Executive Committee size by removing one of the immediate past presidents, leaving the Executive Committee to the president, vice president, secretary, treasurer, and immediate past president. Another amendment provides legislators with a “good cause shown” exemption to the requirement to attend the first Executive Committee in order to serve on the committee.
The 2024 NCOIL spring meeting will be held April 11-14 in Nashville. NCOIL may hold interim virtual committee meetings prior to the April meeting.
Post Details
Publish Date
November 21, 2023
News Type
- Special Reports
Topics
- NCOIL
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