How insurance is adapting for the modern age

Insurance isn’t the most exciting product – but if you flop down in front of a TV for very long, you might begin to think otherwise.

James Harden, Chris Paul and other NBA stars appear in funny commercials alongside a helpful representative for State Farm insurance. Peyton Manning, the retired NFL quarterback, sings a catchy jingle as a pitchman for Nationwide Mutual Insurance Co. – and now an array of well-known musicians have picked up the tune.

Then there’s the ever-growing cast of fictional characters also trying to capture new customers: the gecko with a British accent that promotes Geico, the Progressive Corp. saleswoman Flo, and mayhem made incarnate as Mayhem, who is eternally wreaking havoc in ads for Allstate Corp. And of course, there’s the professorial figure played by J.K. Simmons who tells tales of unlikely disasters enshrined in a Hall of Claims – with Farmers Insurance Group inevitably coming to the rescue.

Entertaining or not, insurance itself plays an essential role – and one that is increasingly important in today’s society. Innovative technologies are ushering in everything from smartphones to drones to ride-hailing services and self-driving cars – all of which bring both opportunity and risk. Our increasingly interconnected digital world also allows insurers to become more efficient. And the industry itself is constantly evolving, with new rules and regulations introduced all the time.

In this special section on insurance, we check in with several key New York officials to get the latest on what’s going on in the industry and how it’s adapting to the modern age.

RELATED: 5 big insurance issues in New York

Cybersecurity & Virtual Currency

C&S: What is the department doing to keep up with the creation of new, personalized and digitized ways of providing services?

MV: New York encourages companies to innovate, to be ahead of the curve on new technology, while at the same time we recognize that technology comes with certain risks.

Specifically, in insurance markets, we are looking at the use of data for underwriting and how technology can assist. However, it needs to be carefully studied as well. We have been revealing the use of external data sources for underwriting and the use of algorithmic models for life insurance policy issuance.

At DFS, we balance efficiency and innovation with consumer protection and accuracy. We are also modernizing our own internal processes to further keep pace with emerging technology.

C&S: What else is the department paying attention to when it comes to insurance providers?

MV: It should come as no surprise that DFS has spent a lot of time on health insurance, particularly in protecting coverage and fighting attempts by the federal government to rollback insurance protections and increase prices for consumers. In New York, we are proud to have a robust insurance market that provides consumers with comprehensive health care at affordable prices.

DFS has also focused on important issues currently impacting consumers, such as maternal depression, battling the opioid epidemic and banning the use of education and occupation as factors in determining auto insurance premiums. The four major auto insurers in New York are now in compliance with DFS’ regulation.

In the life insurance sector, DFS has proposed a “best interest” standards regulation to protect consumers, which we hope to make a national standard for life and annuity products.

We continue to work with insurers on transactions, and in the past few years we have welcomed new companies to New York and expanded New York platforms.

C&S: DFS recently passed cybersecurity regulations. What are the next steps?

MV: New York’s landmark cybersecurity regulation passed the one-year mark (on) March 1. Feb. 15 was the date for the first certificate of compliance deadline under our regulations. We believe our regulation has gone a long way to improve safeguards for New York’s financial services industry, and it has led to the NAIC adopting a model law that is based on the DFS regulation.

Unquestionably, cybersecurity is a critical issue, which is why at DFS we finalized the regulation and have incorporated cyber exams in all banking and insurance exams across the agency.

The DFS cybersecurity regulation has raised the bar across the nation for financial institutions to further defend against cyberattacks, which protects us all.

C&S: What are the department’s main concerns when it comes to title insurance?

MV: DFS conducted an extensive investigation and discovered alarming industrywide practices that violated New York’s anti-inducement law. DFS issued two regulations following two extensive comment periods prior to the final title insurance regulation going into effect. These actions resulted in a regulation that addresses affiliate transactions and unlawful inducements. The regulations leveled the playing field to protect consumers and lower closing costs. The title insurance industry has low claims ratios and requires robust regulatory supervision.

C&S: Are there any particular challenges related to virtual currency? How will the department enforce virtual currency regulations? Is there a risk that businesses that use it could avoid oversight by keeping payments probate?

MV: Once again, New York is the leader in a new, innovative market that also presents risks. After thorough review and a public hearing, New York finalized the virtual currency licensing regulation, which adds to existing licensing for trust and money transmitters. At the time DFS enacted this regulation, the industry was in its infancy and has evolved further.

Other regulators are now following DFS’ lead. Virtual currency is an industry where regulation is necessary to protect markets and permit innovative businesses who engage in lawful business, while protecting markets and consumers.

Title Insurance & Distracted Driving

C&S: What is your committee doing to keep up with the creation of new, personalized and digitized ways of providing services?

JS: Last year, I was instrumental in advancing ride-sharing for upstate New York, and I am continuing to look at additional ways the state can take advantage of technology to help consumers and enhance our business climate.

The Senate Insurance Committee just recently passed my bill (S427) that would clear the way for peer-to-peer personal vehicle sharing. Car sharing, as it is known, would provide a number of economic, environmental and transportation benefits.

I am also working on a bill (S2526) that would allow all insurance notices and documents to be delivered electronically with policyholder consent. You would think this would be common sense in today’s electronic world; however, current law requires documents or notices be “mailed.”  Several consumer safeguards are built into the legislation, which mirrors similar laws already in place in at least 13 other states.

Finally, I am awaiting a report concerning autonomous cars. Last year’s state budget authorized demonstrations and tests of the burgeoning technology with strict oversight by the DMV and the New York State Police. A report is due by June 1, 2018, and I look forward to evaluating the findings.

C&S: Bill S6704, regarding title insurance, has been criticized. Why do you think this bill is necessary, and where does the criticism come from?

JS: Title insurance is an important industry employing thousands in New York state. I do not want to see punitive regulations employed simply because of a few bad actors or sensationalized cases. This legislation would clarify the law and stop the Department of Financial Services from what I view as regulatory overreach.

Title insurance differs greatly from typical insurance products. Agents do not advertise directly to consumers, instead, they rely on interpersonal relationships, common in the general business economy. The new DFS regulations would prohibit a title agent from being able to buy a cup of coffee for a client, or host a lunch – normal business practices. Regulation 208 could limit competition, and result in several insurers leaving the New York marketplace. As the sponsor of the original legislation which recognized title insurers as a regulated profession under the insurance law, I know the Legislature did not intend for common marketing activities to be prohibited, and my bill will expressly clarify the legislative intent.

C&S: In the state budget, Cuomo has proposed a windfall tax on health insurance providers. Is that still under discussion?

JS: The Senate rejected this proposal. Along with Sen. (Kemp) Hannon, I sponsor S7587, which would require that any revenue realized from the federal Tax Cuts and Jobs Act of 2017 is returned to consumers in the form of rate reductions, refunds or credits.

C&S: What’s the latest on “principle-based reserving” for the life insurance industry?

JS: I just introduced S8024, which is the Department of Financial Services’ proposal on principle-based reserving. I also sponsor S6439A, which would allow principle-based reserving. We are currently evaluating the new proposal, and look forward to working with the department to bring principle-based reserving to New York in the very near future.

C&S: Critics say medical malpractice payouts are too high in New York. Do you agree? Is that a result of Lavern’s Law?

JS: Recently, I read a report which stated that New York paid $617.9 million in medical malpractice payouts, which is much higher than neighboring states. Since Lavern’s Law was just recently enacted into law, I do not believe the exorbitant costs can be attributed to the law, but its impact on medical malpractice premiums and payouts is to be determined.

C&S: What is being done in the state Legislature to address distracted driving?

JS: One initiative being explored is the use of new technology to increase enforcement related to distracted driving. Last July, the governor directed the Traffic Safety Committee to study new “textalyzer” technology that is specifically designed to detect if a cellphone was used moments before an accident. I know there are questions regarding the constitutionality of the proposal, and I am interested in evaluating the committee’s findings.

Windfall Tax & Life Insurance

C&S: What is your committee doing to keep up with the creation of new, modern ways of providing insurance services?

KC: The Assembly’s Insurance Committee is supportive of measures encouraging responsible new technology and services. The most prominent recent issue was our work to create a modern insurance framework for app-based ride-hailing services.

The intricacies of the insurance administration, while not the front page of the news, as a new technology, also had our attention. For example, we allowed for domestic mutual life insurance companies to offer their policyholders the option to vote during uncontested elections and to send board meeting notices electronically. This was a common-sense measure that up until recently was not allowed. We also continue to work with stakeholders and our sister states to deal with an array of cybersecurity issues.

While not a “new, modern way of providing services,” the reality of climate change presents new and modern challenges. The committee has been focused on assuring that companies provide fair, prompt payment that customers expect following natural disasters. With Superstorm Sandy and the recent surge of extreme weather, we are actively advancing legislation to clarify existing law and protect customers during times of crisis. One example is a bill I carry in the Assembly (A391) that creates standard definitions for commonly used terms and phrases found in homeowners’ and commercial line policies. Certain phrases may have assigned various meanings when used by different companies. This leads to confusion among homeowners, especially following a disaster when they need insurance coverage most. Consistent definitions for terms such as “utility disruption” or “hurricane trigger” will give policyholders peace of mind, knowing that their policy should be interpreted the same way as their neighbor’s following a natural disaster.

The committee is also looking into insurance-related issues raised by advances in medical technology and growing health pandemics. This includes complaints surrounding the denial of coverage of Lyme disease and other tick-borne illnesses. As a result, we are considering legislation that calls on the state to evaluate the causes of these problems (A4863A).

Further, recognizing vast changes in health insurance paradigms, the committee recently passed a measure that makes the remaining out-of-network hospital charges for emergency services subject to an independent dispute resolution process (A7611A). If enacted, it would ensure that facilities are not permitted to take advantage of patients by charging exorbitant fees that ultimately drive up the cost of health care and insurance. Under current law, out-of-network emergency charges for physicians are already subject to an independent dispute process, but other hospital emergency charges are not. The bill would correct this anomaly. It’s important for families to attend to the health of a loved one and that any dispute over charges be between insurers and providers.

Another health concern we are addressing is coverage for in vitro fertilization. Medical advances in technology have moved to the point where it is a common and safe practice. Coverage has not kept up and billing issues are a regular occurrence. The committee passed legislation that updates the existing coverage language for infertility treatments to ensure that New Yorkers have access to treatments that are customary practice, including in vitro fertilization (A2646A).

C&S: Bill A8467, regarding title insurance, has been criticized. Why do you think this bill is necessary, and where does the criticism come from?

KC: Last year, the Assembly Insurance Committee held a hearing on the impact the new regulations are having or would have. The testimony and evidence from stakeholders and consumer advocates was compelling. Since then, even more colleagues have approached me as chair of the Assembly’s Insurance Committee to discuss title insurance regulatory change. In fact, more than any other single insurance topic, Assembly members from across the state have brought the concerns of their constituents regarding title insurance regulation to my attention. While some would attribute the currency of the issue to heavy industry lobbying, it is clear, instead, that the disruption caused by regulatory overreach has impacted stakeholders in every phase of real estate transactions.

It is also necessary to remember the important role real estate plays in our state’s economy. The sweeping nature of new regulations promulgated by the Department of Financial Services, many believe, go beyond the authority of existing law and, viewed from a practical perspective, have made it impossible or extremely difficult for responsible parties to continue to provide necessary title services. Independent title closers advise my colleagues and me that they have lost a revenue stream that is necessary for their very survival in the business. Title insurance companies, while welcoming reasonable regulation, report that basic services that were provided to attorneys and others, such as continuing legal education classes, are now prohibited. Title closers are essential to the clarity and completion of real estate transactions.   Keeping up to date on local customs and practices as well as the legal review that CLE offers is a necessary component of keeping titles secure and clear. These are just two examples of how the new regulations have negatively impacted the real estate business in New York for buyers, sellers and those engaged in conducting the transactions.

Assembly Bill A8467 is intended to reaffirm the tenets of existing statutory law, to restore market stability and to provide a basis upon which reasonable and necessary regulation can ensue.  While the state Senate has already passed the companion measure, the Assembly is reserving the opportunity for modifications necessary to ensure consumer protection and to provide a sound legal basis to regulation and prohibition of unacceptable practices by some in the industry.

While the steps taken administratively by the superintendent of the Department of Financial Services in the name of consumer protection, the linkage between the sweeping regulation and the benefit to real estate purchasers and sellers is tenuous. Meanwhile, the very stability of an industry the state of New York relies upon for a significant part of our tax base has been shaken.

The Assembly Committee on Insurance will continue to work to provide reasonable standards of conduct for title insurance companies while still allowing them to follow ethical local traditions that are the bedrock of New York commerce.

C&S: In the state budget, Cuomo proposed a windfall tax on health insurance providers. Is that still under discussion?

KC: The health care windfall tax proposal was a misguided approach to what is a much more serious financial situation faced by the state due to changes in the federal tax code. My colleagues and I in the Assembly rejected the 14 percent tax on health insurers in our one-house budget. Ultimately, the proposal was not included in the final spending plan.

C&S: What’s the latest on “principle-based reserving” for the life insurance industry?

KC: We are getting close to a solution that will provide the Department of Financial Services with the tools they need to implement principle-based reserving while having necessary legislative checks and consumer protections in place. Existing proposals by DFS would remove legislative guardrails from an essential part of solvency protection for the life insurance industry.  We are in earnest negotiations to build a framework for a responsible realignment of asset consideration while providing the flexibility necessary to the industry and regulators in a global marketplace.

C&S: Critics say medical malpractice payouts are too high in New York. Do you agree? Is that a result of Lavern’s Law?

KC: No. There is absolutely no evidence that medical malpractice recoveries are disproportionate to the injuries victims receive at the hands of a very few irresponsible medical professionals. The real issue is how we and the medical profession can work together to make health care even safer. Reducing medical malpractice is a shared goal of responsible medical professionals and those of us charged with regulating them.

Steps have been taken to ensure that victims have a fair opportunity for recompense, for example, where latent conditions are hidden until the passage of time. That is why Lavern’s Law changes the statute of limitations for medical malpractice suits from two and half years after the procedure to two and a half years after discovery of the medical error. Passing this measure was necessary to protect the rights of individuals who suffered medical malpractice caused by a misdiagnosis or failure to diagnose. Aligning the New York statute of limitations to be consistent with many other states is a necessary step to ensure our medical consumers can seek just benefits for the harm and pain caused by actionable errors.

C&S: What is being done in the Legislature to address distracted driving?

KC: New York passed the first hands-free driving law in the country in 2001 and enacted legislation to stop texting and driving in 2009. The law is clear that it is illegal to use mobile devices while driving and drivers who violate the law face significant fines and five points on their license. Considered a primary offense, law enforcement is empowered to pull over drivers over whenever they suspect or observe distracted behavior. The penalties here are strict, necessary and fair.

Moreover, while state and local police have worked to enforce these laws, it remains paramount that drivers recognize that they are making a choice. Texting or talking on your cell phone while driving is dangerous and accidents will continue to happen until people refrain from using their phone. Efforts to properly fund public awareness and educational campaigns are necessary to help combat the problem. The Assembly Insurance Committee continues to review a number of proposals which ensures that drivers remain safe on the road and held appropriately responsible for reckless decisions.