Regulatory Year in Review: 7 Trends in Insurance Regulation

After a year of biweekly Regulatory Roundups, we’re applying our yeehaw energy to tease out what regulations are part of distinct trends that we can expect to rise or fall over the next year.

Though some regulatory changes reflect normal administrative development, other state process changes and legislation are less routine and speak to industry-wide changes and broad strokes of cultural or natural shifts. From climate change to COVID-19 to demographic changes, macro-level factors have micro-level repercussions.

Before we dive in on what those changes might be, it’s important for carriers and agencies to consider how they accommodate these changes. Do you have change management processes, or does your business scramble to react to each new change?

Change management: How do you handle regulatory changes?

Regardless of trends and driving influences, a state’s executive, judicial, and legislative branches each have the ability to effect regulatory change. Multiplied across all 50 states and other jurisdictions, the industry propensity for constant change is difficult for insurance stakeholders who work across the nation.

Insurance agencies and carriers that prioritize change management as it applies to regulatory change can lessen both risks and costs for their whole organization.

“Current economic circumstances have carriers and agencies re-evaluating their cost centers, and necessarily compliance is bound to be one of those cost-centers that gets a review for its efficiency and change-management effectiveness,” said Niji Sabharwal, CEO and Co-Founder of AgentSync. “Regulatory change, as we’ve seen, is an inevitability in insurance. But without modern infrastructure, it presents a risk.”

To reduce both insurance regulatory risks and efficiency costs, this is as good a time as any for an organization to re-evaluate its approach to change management, particularly as it applies to the following regulatory trends.

1. Broad market changes to property and casualty lines

Massive weather-related events have always and will continue to shape insurance.

In 2022, Florida held two special sessions to address their insurance market, with fairly dramatic omnibus packages coming out of the discussions. From authorizing state-backed reinsurance with a billion dollars in taxpayer financing to tightening claims payout deadlines, legislation from the state has tried to shore up funding for insurers even as it protects consumer interests. 

Florida was hardly alone. Louisiana also addressed major legislation regarding its property and casualty market, with a legislative package that focused on homeowner resilience and consumer protections. 

In addition to state changes to the property and casualty market, another regulatory hot take on extreme weather events is that states are taking more notice of how insurance law can impact global warming, even tangentially. Illinois adopted the NAIC’s Climate Risk Disclosure Survey, which requires insurance carriers to report their direct and indirect business risks from climate change as part of their annual filing. 

It seems unlikely that we’ll see a snowball effect in which several states adopt the NAIC’s model in the coming year or two. Yet, it would be disastrously foolish to think that changes to property and casualty regulation will stagnate.

2. Adjuster licensing to see more standardization

Insurance adjuster licensing has a history of being a trouble spot for state collaboration. Quite a few states don’t require adjusters to have a license – resulting in “designated home state” (DHS) licenses – and even ones that do have a lot of variation in standards. Many adjusters work for carriers that have bases in multiple states and may deploy their adjuster force to disaster areas for property damage assessments on short notice. 

States that license adjusters may also have a whole different set of requirements when it comes to deploying adjusters in the aftermath of an emergency. This results in a complete patchwork of “if/then” requirements for DHS licenses, public adjusters, and carrier-employed adjusters.

“Many states are just beginning to consider how to make adjuster licensing more uniform,” said Sandy Allen, Solutions Architect at AgentSync. “In 2022 we saw states consolidate specific adjuster lines and tighten restrictions on license reciprocity. A lot of people are having to re-evaluate their foundational license because of where they live, which is a headache for the compliance teams responsible for those peoples’ licenses.”

This restructuring of adjusters is very likely to continue or even pick up pace, both as a response to the changes in property and casualty legislation in various states and as a forward action in the insurance sphere to make adjuster licensing mirror the uniformity found in producer licensing. 

3. States continue to evolve annuity regulations

With the Department of Labor rule regarding annuity sales taking full effect in 2022, it was no surprise that states queued to adopt the NAIC Best Interest Annuity Standard and its accompanying changes to continuing education regulations.

The NAIC’s best interest standard brings state laws into alignment with the DOL fiduciary rule, setting out guidelines for ways insurance carriers can mitigate the risk of their producers overhyping annuities and selling them inappropriately. 

Some states also have adapted their solvency modeling for life insurance companies to reflect the growing influence of variable annuities and variable life insurance products, which have securities-based components. As solvency models evolve, life insurance carriers will also need to re-evaluate their business workings to stay in compliance.

4. Regulatory appetite for Big Data

From federal regulation of cybersecurity reporting to the Connecticut Insurance Department restructure of its actuarial and data science functions, regulatory appetite for Big Data seems to be increasing.

Washington’s Commissioner of Insurance Mike Kreidler lost a court battle, with judges determining he had overreached by using the office to forbid carriers from using credit ratings in underwriting. Kreidler has indicated the issue isn’t over, however, saying he will continue to seek legislative support for the prohibition.

“Insurance as an industry has always used Big Data if you think about it, but the availability of new kinds of data, and new ways to splice information, make this an area that insurance carriers and insurtechs are innovating,” said Niji. “And, to some extent, when there are innovations in insurance, regulation is sure to follow.”

5. Health care reforms at the state level will continue

2022 was a big one for health care regulation. With the Supreme Court of the United States overturn of the landmark abortion ruling of Roe vs. Wade, some state departments of insurance moved to clarify their regulatory position on how insurers must handle abortion coverage.

If that wasn’t significant enough in its own right, states continued COVID-19 emergency orders or, alternately, rolled them back, prompting carrier coverage for various procedures and preventative care. Inflation also pushed states to boost consumer protections and price caps in healthcare insurance, from premium limitations to prescription lists. Connecticut even tied premiums to profit margin limits.

And state regulators collectively expressed concern about private insurances’ approach to Medicare, with advertising for programs like Medicare Advantage coming under increased state scrutiny even as the federal government takes up increased regulation of Medicare-adjacent advertisements.

6. Increased standardization in carrier appointment processes

Similar to adjuster regulation, the processes for insurance appointments are more complex and disparate than those for producers, making it difficult for insurance carriers to work across state lines with confidence in their compliance process.

Some states made minor shifts such as adjusting the display date for appointment renewals, and others like Hawaii overhauled their infrastructure to send information through State Based Systems, aligning more closely to the SBS standards most other states follow. 

“These changes make NIPR and its partners like AgentSync even more valuable to carriers and agencies, because we’re able to more easily provide state data and humanize it and give it context,” said Sandy. “For carriers and agencies that don’t have these solutions in place, they have built workarounds for all these state variations, and undoing that to accommodate a new process can actually cause headaches, even though this standardized movement is ultimately good for the industry.”

While it’s unlikely another state will completely table-flip its process in 2023, continued nip-tucks to carrier appointments are likely to continue in the coming years.

7. Remote-friendly laws continue

In addition to forcing forward action on Big Data and healthcare regulation, COVID-19 has forced state and nation-wide entities to reconsider business regulations that assume workers are constantly present onsite. 

“Regulatory changes aren’t always caused by international pandemics, but they are always happening,” said Niji. “And, especially for insurance businesses that have in-house legacy systems, handling this constant change can be a massive cost-base and present real regulatory risks.”

Whether the states you work in implement a change that follows these trend lines, or whether it mavericks out its own unique legal architecture, having modern insurance infrastructure that is built with flexibility to respond to shifts in the industry is imperative. If you’d like to learn how AgentSync can provide you with solutions, handle licensing and appointment compliance for you, or buttress your existing tech, schedule a demo today.