NY Regulators Call on Insurers to Reveal Data Sources

Imagini pentru NY Regulators Call on Insurers to Reveal Data Sources

Insurers operating in New York State will have to reveal by July 25 whether they rely on external data sources to underwrite life insurance coverage, according to state regulators.

The request for the information was initiated by Maria T. Vullo, superintendent of the New York State Department of Financial Services in a letter last month to insurers and fraternal benefit societies.

Vullo’s office wants to know whether insurance companies are using credit scores, purchasing habits, affiliations, home ownership records and even educational attainment as external data points in their underwriting procedures.

“This is, as far as I know, the first inquiry on the subject,” said Mary Jane Wilson-Bilik, a partner with the law firm of Eversheds Sutherland.

“This memo is groundbreaking in that it’s the first time that a regulator has asked about this for life underwriting,” she said.

Use of External Data Not Illegal

As accessibility to data grows and data volumes multiply, insurance companies want to harness that data to be able to issue policies faster and at prices that reflect the risk companies bear when issuing a life policy.

Simplified underwriting, which avoids invasive blood and urine samples, allow insurers to issue life insurance policies in a few seconds.

There’s nothing illegal about collecting outside data sources, so long as the underwriting is actuarially justified, said Wilson-Bilik.

In recent years, with the dissemination of massive amounts of data, some insurers have begun to address underwriting risk at a more granular level by taking advantage of consumer databases and including the data in plan ratings, a technique called “price optimization.”

Critics say price optimization could result in discriminatory rates and unearthing credit histories to help set an insurance premium could even run afoul of the Fair Credit Reporting Act.

Meanwhile, regulators in some states have restricted the use of price optimization in personal lines coverage.

In the case of a life policy, an insurer that collects data from external sources might kick the application over to underwriting, where the applicant could get turned down.

“What if you didn’t get simplified (underwriting) because of your external data factors, then went to fully underwritten and then were denied life insurance?” she said.

Specific Information Sought

New York regulators are looking for insurers that offer accelerated or algorithmic programs and use information other than a doctor’s statement, motor vehicle reports and prescription drug data to supplement medical underwriting, Vullo said. Those insurers must respond.

Regulators want to know how and what specific data elements are being used. Among their areas of interest:

*Which third-party vendors are providing information.

*When information becomes an algorithmic input, what weight is given to data elements?

*How algorithmic underwriting is disclosed to applicants.

*What recourse applicants have for adverse decisions?

*What kind of data security procedures are in place?

Issues surrounding external data sources to use in policy ratings in personal lines were summarized in a 2015 white paper on price optimization by the National Association of Insurance Commissioners, and have been discussed within the industry for many years.

But it’s not clear whether complaints triggered the New York regulator’s request for information or if the Vullo’s office is simply following steps already taken on the property-casualty side, Wilson-Bilik said.


NY Regulators Call on Insurers to Reveal Data Sources

Accident Not Your Fault? Your Insurance May Still Go Up, Report Says

Imagini pentru Accident Not Your Fault? Your Insurance May Still Go Up, Report Says

Many drivers who cause accidents expect to see an increase in their auto insurance premiums. But even those who are deemed not culpable could end up paying more for coverage, a report from a consumer group finds.

The Consumer Federation of America sought online price quotes from five of the largest auto insurers in 10 cities to see what happens to premiums after drivers are in accidents. The study found that based on the quotes, drivers in New York City and Baltimore tend to pay the most after being involved in accidents that they did not cause.

The penalties add to the costs of auto insurance, which is required for drivers in most states but expensive for many, said Doug Heller, the researcher who conducted the analysis for the consumer federation.

“Innocent drivers who don’t cause accidents should not be charged more because someone else hit them,” J. Robert Hunter, the consumer group’s director of insurance, said in a telephone conference call this week with reporters.

It is the latest in a series of reports that the federation has published on car insurance costs.

The new study said that the average annual premium increase quoted drivers with a not-at-fault accident on their records ranged from $60 in Atlanta to more than $400 in Queens.

Two cities — Los Angeles and Oklahoma City — showed no increase because state laws in California and Oklahoma prohibit surcharges on drivers who are involved in accidents through no fault of their own, the consumer group said. (Other states may also limit surcharges, the federation said, but they were not studied.)

The report found differences in the way insurers applied surcharges. Progressive applied surcharges to every quote except in cities where their use is prohibited by state law.

Geico and Farmers sometimes raised quoted rates by 10 percent or more, while Allstate “occasionally” penalized drivers, the report found. State Farm was the only insurer tested that never increased quoted rates for drivers who had not-at-fault accidents.

A State Farm representative referred a request for comment to the Insurance Information Institute, an industry trade group.

Loretta Worters, a spokeswoman for the insurance group, cautioned that online rate quotes are merely a starting point. Insurers, she said, ultimately base auto policy rates on “much more information” than initially gathered through a quote requested via an insurer’s website.

David Snyder, vice president of policy development and research with the Property Casualty Insurers Association of America, another trade group, dismissed the analysis as “overly simplistic.” He said the report failed to take into account that states define not-at-fault accidents differently. Some states have blanket prohibitions on such surcharges in certain situations — say, if one car is parked. Other states allow penalties, but rules for how they are assessed vary depending on the circumstances of the accident, he wrote in an email.

“The end result is a report that attempts to present auto insurers negatively,” Mr. Snyder said, “but fails to provide customers with accurate or useful information.”

Here are some questions and answers about auto insurance:

Why do some insurers charge drivers for accidents they did notcause?

Insurers say it often is not clear which driver is at fault. Ms. Worters said your insurer may incur costs, even if you are not at fault, as a result of “subrogation,” or the process of seeking payment from the other driver’s insurer. “Assigning fault in an accident is rarely a zero-sum process where one driver is 100 percent at fault whereas the other driver is zero percent at fault,” she said.

There is “a tendency to believe the other driver is always responsible as opposed to me, when the facts may indicate otherwise,” Mr. Snyder said.

How can I tell if my insurer may penalize me for not-at-fault accidents?

Consumers should ask their insurers, or their insurance agents, if their policy allows for such penalties, Mr. Hunter said. If it does, you may want to seek quotes from other insurers.

What is the best way to keep my auto rates affordable?

Consumer advocates advise shopping around periodically. Mr. Hunter suggested clicking on a map available on the National Association of Insurance Commissioners website to find an insurance cost-comparison tool. Drivers can use the tool to see which insurers charge the lowest rates for people with similar profiles.

He also suggested checking the insurers’ complaint records on the N.A.I.C. website before making a decision. The process of comparison shopping should take less than an hour, he said.

I Ain’t Saying He’s A Gold Digger: Kanye West Just Wants His Insurance Claim Paid

Kanye West reportedly once said that his greatest pain in life is that he will never get to see himself perform live. Now that he’s going into litigation against an insurance company, he may need to update that ranking.

Earlier this week, Kanye West’s touring company – Very Good Touring, Inc. –filed a lawsuit against various Lloyd’s of London syndicates (for all intents and purposes, an insurance company) over a denied insurance claim arising from West’s cancelled 2016 Saint Pablo Tour. As has become common in the high-stakes entertainment industry, the touring company took out a policy with Lloyd’s to cover any losses they might incur because of a covered non-appearance or cancellation of tour events. With so much money riding on the availability of a few irreplaceable talents, it behooves the touring companies (or movie producers, or any company investing millions of dollars in a venture entirely dependent on the performance of a specific entertainer) to take out insurance policies to manage their risk. Very Good Touring bought one such policy to cover losses they might suffer if any of the tour dates in the first leg of West’s Saint Pablo Tour were cancelled.

After the first leg of the tour went forward with few interruptions (except for two October 2016 events that were rescheduled after West’s wife, realty television star Kim Kardashian, was robbed in Paris), problems quickly arose during the second leg. On November 19, 2016, West was unable to finish a show in Sacramento and, according to the complaint, his “behavior was strained, confused and erratic”, and ticket holders were given full refunds. When West’s medical condition failed to improve, the rest of the tour was quickly cancelled and West was hospitalized at UCLA Neuropsychiatric Hospital Center, where he stayed for 8 days before being released under full time care and supervision (which, according to the complaint, continues today). Very Good Touring tendered a claim to Lloyd’s and sought to recoup just under $10 million in losses as a result of the tour cancellation caused by West’s ailment. Lloyd’s has so far refused to pay the claim.


States Have Some Bad Ideas for Keeping Insurers

The more markets left without insurance, the harder Obamacare’s problems are to fix.

Insurers have been pulling out of Obamacare, and that’s a problem.

How big a problem depends on where you live. In some counties, no insurers may be willing to offer coverage. In others, such as the metro New York City area, competition remains robust. But when you look at the mapsof coverage, the pattern is clear: Every year, the areas with deep markets shrink, and those with monopolies, near-monopolies, or no coverage at all grow. And even in relatively healthy exchanges with a fair number of choices, exits mean disruption for customers who may lose access to their current doctors.

States are finding creative ways to keep insurers on the exchanges. So far, two strategies seem to be bearing fruit. The first is to have the state pick up the excess cost for the sickest patients, allowing insurers to keep premiums lower, and perhaps prevent the dreaded “death spiral” where rising costs raise premiums and drive healthy patients out of the market, until all you have left is very sick people and very expensive insurance. Alaska has takenthis approach, and it seems to have kept premiums in check, though they’re still very high.

But this approach costs money, and a lot of states are already having budget trouble. So an alternative is to leverage existing spending — for example, by giving preference on Medicaid contracts to insurers that are offering exchange policies. This approach garnered a lot of excitement when Nevada announced it, and New York followed suit. A solution that shored up the exchanges without costing states a penny! What’s not to love?

This week’s news suggests one reason. Aetna announced that it is pulling out of the last Obamacare market where it was considering offering insurance in 2018 — Nevada, where yes, they were applying for a Medicaid managed care contract. When that contract was terminated (apparently for unrelated reasons), so was Aetna’s possibility of selling insurance on that exchange. Nevada has had a challenging time finding insurers to sell in its large rural areas, and this announcement doesn’t help.

Aetna’s decision also suggests the problem with this seemingly easy fix. The individual market is a small portion of the overall health insurance business, and it may indeed be possible to force insurers to stay on the exchanges in order to keep those other, profitable lines of business. But that doesn’t do anything to fix the cost problems that have made the exchanges so unstable. If losses on the exchanges are large, that money is going to have to be made up somewhere — or else insurers will exit those other contracts, leaving states in worse trouble.

Tying exchange insurance to some other contract may make Obamacare look more stable, at least temporarily. But it makes other programs less stable, because it ties their fortunes to a system that has substantial underlying issues. A policy that started as a way to help states exercise leverage over insurers could easily end up in the reverse situation, where insurers can get better deals on big contracts by saying “Nice exchange you’ve got there. It would be a shame if anything happened to it.” I don’t think that’s what happened in Nevada; Aetna has pulled out of all of its other Obamacare markets, simply because they don’t think these are profitable lines of business. But the potential is there if other states follow Nevada’s lead.

That leaves pouring more money into the system. This approach might actually keep premiums low enough to prevent an exodus of healthy customers. The only problem is, where to get that money? Minnesota is looking to spend almost $600 million over the next two years, much of which will be taken out of other health insurance subsidies for low-income households. And unless a federal waiver is approved, the state will have to get the rest by raiding its rainy day fund. And Minnesota is relatively fiscally healthy, compared with many other states. It’s hard to see where Illinois, for example, could find the money to backstop its insurance exchanges.

States may need to find that money somewhere, or figure out some other way to keep insurers on the exchanges. If 2018 continues the pattern we’ve seen, then insurance-less counties are about to become a major headache for regulators — and an even worse problem for the people who live in those places. The more markets left without insurance, the harder this problem gets to fix. This may not be the death knell that Republicans have been listening for, but it’s the kind of symptom you need to treat right away.




Do Robo-Advisors Have a Place in Insurance?

Do Robo-Advisors Have a Place in Insurance?

When my co-founder and I were fleshing out the foundation of PolicyGenius, we knew our goal was to bring the insurance-buying process — from education to shopping to application — to the modern online consumer. The question was, “How do we do this?” And as we spoke to consumers about their decision journeys, we realized that the answer wasn’t new. It had been around for 30 years.

Time after time, unprompted, we’d get asked why there wasn’t something like TurboTax for insurance.

TurboTax helped pioneer robo-advice in household finances by offering expert-level guidance without requiring a face-to-face appointment with a specialist. It showed that it could be done for a complex financial process (there isn’t anything more complicated than filing your taxes, is there?) and now robo-advisors are taking over the investing world thanks to the likes of Tradeking, Wealthfront, Betterment, and more.

So the people we wanted to reach wanted TurboTax for insurance: something where they could go through the insurance shopping process — the whole process — online, getting guidance that they could follow at their own pace.

Here’s what we learned by building it.

You can’t be just an aggregator.

You can find and compare insurance policies on PolicyGenius, so it’s tempting to describe the process as like “Kayak, but for insurance.” But unlike travel aggregators, we don’t just gather a bunch of deals and show them side-by-side on the screen. We can’t. Insurance is more complicated than flights, so we have to do more.

When you go on vacation you buy your plane ticket, go on the trip, post the pictures to Facebook, and go back to your life. Insurance, especially life insurance, is more expensive, longer-term, and more complex. Choosing the wrong flight means you have to wake up early or have no legroom, but messing up your insurance policy has real consequences. That’s why we emphasize education and decision support.

We built a resource center with content that explains different concepts, terms, and scenarios. During the application process, we explain why we’re asking for each piece of information. And with our Insurance Checkup, we show you not only what sort of protection you need, but why you need it.

For a lot of people, shopping online for insurance means plugging your personal information into a form and waiting to get called by a horde of salespeople. That’s not a good experience. Customers don’t want to just be added to a call list. They’re trying to protect the wellbeing of themselves and their family; being little more than a stepping stone for a salesperson to get closer to their quota isn’t reassuring. Instead, we gave people a full shopping experience: go from research to application at your own pace, and only give up your contact information when you’re ready to take the next step in completing your application.

And insurance isn’t something that people think about all the time. That means you have a limited window to reach (and keep) them. How do you make the most of that time? By giving them all of the information and tools they need to go through the whole process upfront without needing to jump through hoops. In other words, don’t waste their time. Showing them the opportunity and value of life insurance through educational content and an easy-to-use process gives users the confidence that they can buy a policy without hassle and benefit from it for years to come.

People will do more than you think they will.

It’s easy to write off digital experiences as only being appealing for Millennials. And even though Millennials make up half of our customer base, that means that half of our users are from older, more affluent segments – and yet they still use and enjoy our digital experience. Remember, they’ve lived most of their lives in a world where TurboTax is the way millions of people do their taxes. They’re not new to this.

Where do you integrate robo-advice? Wherever you can in the funnel – which, as it turns out, is every step.

For example, we customize content and advice so that we’re giving customers relevant information. Even though the advice is “robo” that doesn’t mean it’s impersonal. If you can translate the type of advice a human insurance agent would deliver in the “kitchen table conversation” into an algorithm, then you can deliver tailored advice in a self-service, automated fashion. That’s what our Insurance Checkup does: in five minutes customers can find out exactly what type of coverage they need based on their financial situation.

It doesn’t stop there, though. We provide instant, accurate, automated quotes with advanced underwriting techniques; at the evaluation stage, we’ve built plain-English content and decision-support features that answer the most important questions insurance shoppers have; our insurer report cards highlight all the ratings and customer “moments of truth” essential for the purchasing decision. Step by step, we make learning about, applying for, and purchasing insurance easy and self-directed.

And what happens when you put robo-advisor tools in place in the funnel? More than you’d think.

Our customers spend a lot of time on the research and decision-making steps of the process because we’ve given them personalized content to dig through. They answer a lot of high-friction questions to get accurate quotes (more questions than a typical UX/UI designer would think is possible) and spend upwards of 10 minutes on our site per transaction. There’s only a few days between when they begin the process and when they finish their application, and a vast majority of our users do finish their application once they start – enough that we’ve seen 20% month-over-month growth when the rest of the life insurance industry has stayed relatively flat. We’ve done this by enabling people to buy life insurance the way they want to: with plenty of advice, on their own terms, instantly.

Robo-advice isn’t a one-size-fits-all tool.

We aren’t all suited for robo-advice just yet. Whether it’s because we’re concerned about the security implications of entering all of our financial information online or we just like having an expert sit down with us and answer questions in real life, an agent works better for some people.

Although we’ve been able to reach across generational gaps at PolicyGenius, studies show that older generations (sorry 35 year olds, you’re an “older generation” now) are more likely to prefer a face-to-face experience at some point, while younger people are more comfortable with a fully online process – according to an AXA survey 34% of Millennials want to interact with their insurer solely online, and 8% don’t want to interact with them at all.

But it’s not just an age thing. Whether or not people want to apply for life insurance online depends on their needs and their do-it-yourself orientation; where they fall on that spectrum dictates where you can fit robo-advisor tools into the process to make their experience as seamless as possible.

On one end, you have someone with simple needs — they just want a pretty straightforward life insurance policy, for instance — and they’re comfortable going through it themselves; you can automate every step of the process, from education all the way through to checkout. They don’t have to talk to a single person if they don’t want to.

Then you get to people who want to do it on their own but need an agent due to their financial situation: high net worth consumers with complicated estate planning needs are probably better served with a personal advisor at some point in the process.

The inverse of the latter customer is the consumer who wants (more than needs) an agent but it may not be feasible for them to be supported every step of the way because it’s not cost-effective for the agent to handle every step of the process for them. For these customers, you can complement their journey with robo-advisor tools — let them go through as much as they can on their own and having an agent step in only when necessary so the agent doesn’t have to invest too much in time or resources for a simple policy.

And finally, at the other end of our spectrum, there’s the traditional agent model for anyone who doesn’t want to go through the process alone or has complicated needs that an experienced professional can help with. 69% of respondents to a recent Allianz survey said they don’t trust advice found online, so they’d rather work with an agent than a robo-advisor — so there’s still a market out there for them.

The life insurance industry has been around for a long time. We’re not going to revolutionize it overnight. We don’t have to, and we don’t want to — it’s a large, complex industry, and a lot of people still find value in the way it currently works. But we shouldn’t fight the tools and technology that are available to us, and implementing robo-advisors is one of the incremental changes we can put in place to make buying life insurance easier for everyone.