Readopted credit-scoring model highlights NCOIL’s annual meeting
NCOIL readopted its now 13-year-old credit-scoring model act, designed to protect consumers while enabling insurers to utilize a highly predictive underwriting tool. To date, 30 states have adopted the model in its entirety, while another 17 have adopted some version based on its text.
David “Birny” Birnbaum of the Texas-based Center for Economic Justice urged members of the Property & Casualty Committee to amend the model, in light of what he deemed concerns about practices by lenders that incorrectly, or in other cases unfairly, impact consumers. He recommended that the act be updated to include a cap on the relative impact of credit scores and a litany of other tweaks to account for cyber vulnerability and “big data” issues.
Various industry representatives took turns testifying to the act’s virtues and it ultimately was readopted without amendment. State Sen. James Seward, R-N.Y., noted that companies have moved beyond credit scoring, using all sorts of new data, and that it will be necessary to examine these novel practices in the future.
Harvard Business School professor Chiara Farronato offered an excellent presentation on the economics of the sharing economy, outlining the economic tradeoffs legislators should consider as they look to regulate these new firms. Farronato highlighted that sharing economy firms have a strong incentive to self-regulate through reliance on confidence mechanisms, like online reviews, that enable very personal arms-length transactions. Further, she forecast that enhanced competition will soon confront the lodestars of the sharing economy.
Mark Smith, assistant vice president of government relations at Verisk Analytics, discussed the challenges Verisk’s ISO unit is facing in forecasting appropriate policy language for new kinds of sharing activity.
Wisconsin Insurance Commissioner Ted Nickel briefed legislators on efforts by the National Association of Insurance Commissioners to stay ahead of cyber vulnerability and fast-breaking cyber-insurance developments. That body has promulgated principles for effective cyber security and, more controversially, is on the cusp of approving a cyber security “bill of rights”
Industry representatives offered biting criticism of the proposed bill of rights, on grounds that such a document could engender consumer confusion. Recognized by the NAIC as an “aspirational” document, the bill of rights would not actually have the force of law. Insurance representatives also expressed concerns that it would be used as the basis of a subsequent NAIC model bill.
While NCOIL isn’t currently contemplating immediate action either on cyber security or cyber insurance, both issues will continue to figure prominently on the organization’s agenda, particularly in light of the NAIC’s actions.
There was considerably less controversy surrounding the development of international insurance standards and regulation, on which the NAIC and NCOIL both are firmly on the same side. Both organizations continue to advocate a “Team USA” approach to negotiations with the International Association of Insurance Supervisors. In the near term, their focus will remain on applying pressure to the Federal Insurance Office to fall into line with the rest of the team by encouraging Congress to show interest in the issue.
NCOIL, which next meets Little Rock, Ark., in February 2016, also continued its ongoing institutional transition. Long-time Executive Director Susan Nolan has departed the group and will be succeeded by former New Jersey Insurance Commissioner Tom Considine. In addition, after serving two consecutive years as NCOIL president, state Sen. Neil Breslin, D-N.Y, was succeeded in that role by Sen. Travis Holderman, R-Ind.
The rest of the new slate of officers also was announced, with state Rep. Steve Riggs, R-Ky. serving as vice president; state Sen. Jason Rapert, R-Ark., as secretary; and state Rep. Bill Botzow, D-Vt., as treasurer.