Cybersecurity, InsurTech regulation poised to define 2018
Regulation is often cited as the most significant hurdle to innovation in the insurance industry.
It’s no secret that the insurance industry is increasingly reliant on technology.
As technology advances and expands the scope of the industry, it is up to individual states in the U.S. to impose regulations on what insurers can and cannot do.
Regulation is often cited as the most significant hurdle to innovation in the insurance industry. The role of technology and the challenge of complying with existing regulations speaks to a number of issues: policyholder communication, marketing and solicitation strategies, and licensees and referrals, to name a few.
Fred Garsson, partner & co-chair of Saul Ewing Arnstein & Lehr‘s insurance practice, tracks regulatory trends and issues affecting the market. For companies to improve their operations and remain competitive in the insurance industry, they will need to be vigilant of the many moving pieces within the regulatory world.
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The power of the state
While the federal government has broadened its scope in recent years — namely with the Affordable Care Act — regulatory needs and resources vary on one state to the next and so the insurance industry is responsible for its own leadership and governance.
“What might be important to one state might not be important to another state,” says Garsson.
Additionally, he believes insureds in a particular state may not receive the best coverage if the federal government gets more involved going forward.
While there is no federal oversight over state regulators, they often coordinate their activities and share resources with the help of the National Association of Insurance Commissioners (NAIC).
For example, the Insurance Data Security Model Law by the NAIC gives guidance to other state regulators for how to craft cybersecurity regulations and was designed to complement New York’s DFS cybersecurity requirement.
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“The issue of 2018″
Garsson believes cybersecurity will remain a hot topic for at least another year or two/ But his main focus is InsurTech, which he described as “the issue of 2018 . . . It’s the use of technology by the insurance industry,” says Garsson.
While the industry is known for being a slow adapter to change, insurance transitioned fairly quickly in terms of technology, he says. But many insurance statutes and regulations fail to reflect the technological society in which we now live in. That can leave companies uncertain about whether they are fully compliant.
Garsson points to communication with policyholders as a prime example of the disconnect between technology and regulations. Consider cancellation and non-renewal notices: Some standing statutes written decades ago require notices to be mailed to a policyholder’s address. Today, however, many consumers prefer paperless communications such as via text or e-mail.
“Is it really necessary to change the language of statutes and regulations or is it simply a matter of interpreting the language from the perspective of a modern, technologically advanced society?” asks Garsson. State regulators are likely asking themselves the same question.
Related: Tech: A double-edged sword for insurance regulators