TNCs, price optimization and roofing fraud top agenda at NCOIL
Model legislation governing insurance for transportation network companies may have headlined the summer meeting of the National Conference of Insurance Legislators, but other topics – from “price optimization” to contractor fraud to Europe’s Solvency II – might prove more fruitful areas of discussion for the state lawmakers’ group down the road.
NCOIL continued the focus it has maintained on transportation network companies since the group’s November meeting in San Francisco. Early attempts to produce a model law were complicated by both intra- and inter-industry disputes between insurers, taxis and TNCs. During this most recent convention, two sessions of the Property and Casualty Committee were held to consider a model based on the national compromise that was struck between TNCs and insurers in late March 2015.
Original indications of consensus were dashed when state Rep. William Botzow, D-Vt., took the floor to articulate a list of concerns, ranging from technical drafting issues to substantive matters concerning the employment status of TNC drivers. Hurried changes were made before the committee convened again the following morning and there was some concern that a difference of opinion this late in the game would again delay the model.
However, when Sunday arrived, the final amended language passed unanimously. In its final form, it was substantially amenable to all parties, with the exception of some concern about the identification of specific rating agencies in the model.
Other topics of debate and discussion there were on tap in Indianapolis included:
Price optimization
A panel of experts briefed legislators on the relative merits and drawbacks of using “price optimization” techniques in insurance rate-setting. A subsequent panel of insurance regulators also weighed in on the topic. As should be expected, no consensus was reached about whether or not price optimization should be permitted. While actuaries expressed optimism about the potential for price optimization to reduce cross-subsidies between policyholders, the consumer advocates and insurance commissioners voiced skepticism about moving away from risk-based pricing.
Indiana Insurance Commissioner Steve Robertson made clear he is no fan of the practice, likening its identification to Supreme Court Justice Potter Stewart’s formulation for identifying pornography: “I may not know how to define it, but I know it when I see it.”
Insurance fraud
There was some initial discussion of a model bill to regulate “storm-chaser” roofing contractors who have no permanent place of business. Reports have come in from various quarters that unscrupulous contractors, sometimes with no intention or capacity to perform the work, are taking deposits from desperate homeowners with leaking roofs who can’t wait for the insurers to repair them. Since most homeowners never get up on their own roofs, they may sometimes be talked into replacing a sound roof with a shoddy new roof after a big storm.
Witnesses before the Property & Casualty Committee attested that roofing fraud is the fastest-growing fraud in Kentucky, according to the state’s attorney general, and the crime generating the most complaints, according to the state Chamber of Commerce.
National and global regulation
After years of squabbling merely about who speaks for the states on insurance matters – the lawmakers or the regulators – the front for insurers has expanded significantly, thanks to the Dodd-Frank Act and Europe’s Solvency II. The effort to defend state-based insurance regulation from federal incursion has now layered on top of it proposed international regulation, embracing capital standards, market conduct, executive compensation and governance issues.
Global insurers looking at new international requirements and international accounting standards note they have been locked out of meetings of the International Association of Insurance Supervisors. They also report difficulty figuring out with whom to speak and guessing what authority any particular regulator might have when it all shakes out. The reports are almost comical with people being appointed to new advisory bodies, but unable even to comment on what business was considered or concluded in closed door meetings.
