Transcription:
Nate Golia: (
All right. I think I am live. All right. Good morning, everyone. Nate here. Thank you for sticking with us for all three days of dig in. I'm gonna turn things over to Scott and his panel in just a minute. This is a opportunity for you to hear right from the regulators about their views on digital innovation. And I hope this is a request we've gotten. So, if you're in the other room, come on in, I don't want to shout much louder than that though. I do kind of want to at the same time, but I wanna say thanks to Scott and our panels, I'm gonna turn it right over to them. Scott. Thank you.
Scott Harrison: (
Thank you, Nate. Thank you very much. And my name is Scott Harrison. I'm the president and CEO of the American Insurtech Council. I've been a regulatory lawyer and consultant for almost 30 years. Served as a regulator in New York number of years ago. And prior to that also in Delaware and really what my practice has been focused on advising carriers and occasionally regulators, but primarily carriers on regulatory issues, regulatory challenges that they're facing often driven by innovation. I've done a lot of work in the cybersecurity area. Done a lot of work in anti-money laundering was involved in some technical actuarial issues that I won't go into here, all driven by changes. Many of them driven by changes in technology in innovation. And so as we began to look and see what was going on with inure tech and I've worked with some inure techs, helped get some a few startups licensed and going in states it became apparent to me that the usual environment and at the national association of insurance commissioners where model rules and model laws are developed for adoption by the states.
Scott Harrison: (
And that's where your insurance laws come from that the ecosystem, if you will, for the NEIC really involves people who are highly technical and highly expert in knowledge about insurance. We have actuaries a lot of accountants, a lot of lawyers, a lot of people who know a lot about consumer protection, but we don't really have a lot of people. And in the industry who know that much about technology, this was really brought to bear three years ago at an any IC meeting. When the chair of the then innovation technology task force was that they were talking about just starting to talk about some principles for artificial intelligence. And the commissioner Godfried from North Dakota was chair. The meeting says, is there anybody in the room that were probably a thousand people in the room?
Scott Harrison: (
Is there anybody in this room who understands anything about technology? One guy raised his hand. That was an moment for me. Someone who's been deeply immersed in regulatory policy for a long time, and really cares about the good regulatory policy and really understands what the regulators need in terms of good information, and access to resources. It occurred to me, how are they gonna do this? You know? And so, along with some colleagues we formed the American inure tech council to be the voice for inure techs across the board, whether you're legacy carriers, startups, legacy carriers, or committed innovation, I should say people from the broker community, the investors, everybody who's got a stake in having good regulatory policy done and wanting to have an input in that process at the N I C that's what we created the American inure tech council to do.
Scott Harrison: (
So I'm really grateful for Nate and dig in, and the folks were inviting us, having us, giving us the opportunity to come here today. And to introduce two of the leaders at the NEIC who are involved directly in leading this and have been thinking about this to my left is commissioner Birrane from Maryland. I've known Kathleen for a long time. And she had, has served as general counsel at the Maryland department, lawyer in private practice doing a lot of the same sort of things that I did, although she did it much better than I do. And was appointed commissioner in Maryland in May of 19... 2020 by governor Hogan. And to her left is Trey Downing. Trey's the commissioner in Montana. Trey is actually maybe the only commissioner with a tech background back in the 1990s, when most of the people in this room were either in grade school or your parents hadn't thought about it yet. Trey started a tech company in the first wave, you know, the tech wave, which eventually was what sold to Google.
Trey Downing: (
To no it's, even before that. Okay. Yeah we merged with Yahoo when they were first starting out. Okay.
Scott Harrison: (
Alright. So anyway, we're really pleased. What here's we really would like for you to walk away from here, Today, an appreciation and an understanding if you don't already have it, and some of you I've met here do have an understanding of what the NEIC is and what the regulation is all about, what that process is all about. But if you don't, this is your first time, we'd like to walk away with an appreciation in a sense of what the regulator's role here is and what their responsibility is. And secondly, what the impact of that is going to have on InsureTech, essentially, the regulators will be writing the rules about AI, how it can be used, how it can't be used issues about bias. They'll be really thinking hard about ethical use of AI.
Scott Harrison: (
We've had a number of conversations. There have been some sessions on that. Obviously privacy and data and other issues. And so what the regulators allow, you are gonna allow companies to do insurance companies to do, will have a direct impact. Even if you're not an insurance company will have a direct impact potentially on the viability of your product or your solution, or whether it's one you've already thought of, or one you maybe haven't thought of yet. And so we'd also again like to give you an appreciation that you're now in a regulated environment, whether you knew it or not welcome to the world of regulation with that, I'm gonna stop talking and commissioner brain, if you'd like to share a few words and we'll, they're gonna share some thoughts on where this is going, what they're doing and then we'll have some questions and hopefully we'll have time at the end for some questions from the audience.
Kathleen A. Birrane: (
Sure. So happy, thank you for the introduction, Scott, it's really great to be here. This is always an exciting environment for me. The last two years I've been state insurance commissioner, but before that, similar to Scott, I represented a lot of both very traditional life insurance companies and other national carriers that were getting their toes wet in digital platforms. And beginning to really look for that digital experience and beginning to sell things completely online was very interesting to work with a super traditional global company that was doing its first completely digital product from beginning to end and all the contracts and work around that. And then I've worked with inure techs and startups, and what's always the most interesting, intriguing to me are these really bright people with incredible analytical skills and really knowledge in a very particular area.
Kathleen A. Birrane: (
And they see where there might be a segue into insurance. So something that's really useful and capable. And then in the one instance that I'm thinking about one of my partners in California venture venture capital guy was working with this company and said, I think their product is interesting, but obviously there are gonna be some regulatory issues here and it had to do this particular client had to do with how you can use sort of facial recognition software that also you can map medically the face and were there applications for that in the insurance world. And so they came in with this great pitch and these great ideas and all these things that they were bringing to the capital they were trying to raise. And I said to them, this is really cool.
Kathleen A. Birrane: (
There's a lot of stuff here that maybe we could work with, but you are gonna scare every regulator you talk to because as soon as you start saying, we're gonna underwrite you based on photographs, every fear around discriminatory treatment comes up and rightfully so. So part of the journey, I think for folks that have innovative creative ideas that can intersect and make the insurance value proposition better, anywhere along the continuum, the more important it is that you connect very quickly with people who can then help really incubate your ideas, but help you incubate them in a way that where it's gonna be, it's gonna work within the regulatory environment as a regulator overall. I mean, my ultimate job is to enforce the laws that my legislature passes. That's my ultimate job, but that falls into buckets. And one of those buckets has to do with solvency.
Kathleen A. Birrane: (
That's making sure companies are around so that they don't do dumb things and use dumb technology that causes them to lose money in the end. And that has happened, it's also the other biggest part of my job has to do with consumer protection, which is making sure that consumers are treated fairly and appropriately. And honestly, and that companies do what they say they're going to do. And a fundamental proposition in insurance regulation is that if you treat me differently than Troy or that Scott, there's a fair reason for doing so that you can differentiate for rational reasons that are related typically to business of insurance, like you, a GABA speed demon. And so you should charge me more if you can calculate that. So as we begin as regulators and over the past five or six years, our efforts have intensified what we're really trying to do.
Kathleen A. Birrane: (
And what we're really the most concerned about is making sure that the digitization of processes or the development of particularly digital decision making systems that are fed by large data, which it, people use AI and machine learning to extract to predict, and then apply that to decision making in the insurance world, that the kinds of bias that can lead to unfair discrimination have not crept into that process, wherever it is. So that's the kind of focus when we're looking for stuff, at least from my perspective, regulators are not trying to stop you. They're not trying to end things. What they are trying to do is make sure that what you do is gonna work fairly and appropriately in their market.
Trey Downing: (
Yeah. I agree with a lot of that the concept of unfair discrimination is something that as a regulator, we think about a lot and I'm gonna spend about a minute here, just a little bit about my journey, because it really talks about how I look at this being a regulator. Now, this is my other than the military. This is my first government job. So I came out of the private sector originally in education. I used to as a research scientist at the quant Institute of mathematical sciences at New York university, and one of the founding researchers at the media research lab, and also one of the founders of the center for advanced technology, which was a New York state program for liaising with private industry, trying to understand emerging technical opportunities.
Trey Downing: (
So that was kind of my beginning in that space. And I taught briefly in the information technology at New York university, but I left there cuz I had an opportunity in the private sector where I did as Scott said, did a startup company that we successfully merged with Yahoo when they were first starting out. And that was a really interesting time then and did a lot of tech venture. So helping tech companies find angel financing to do the same. And so that was kind of my background. When I left there was after September 11th, that's when I joined the air force confused a few people. And in that mean after that, I started looking at other other opportunities. And so I built a business where we were raising money from investors to buy commercial real estate and built a pretty large portfolio and saw opportunity to ensure that.
Trey Downing: (
So we started a captive insurance company and then eventually started doing a third party renter's insurance for self storage tenants. And that was my foray into the insurance world. And one of the things that was interesting to me is coming out of academia and technology suddenly I found myself into very highly regulated businesses, both on the security side and on the insurance side. And it's interesting coming in there if you don't have that experience, you just think if I build it they'll come and you just wanna run your business and innovate. And that's where my mindset was until you have people knocking at your door saying, well, there's rules. And so in Montana, when this I'm a year and a half into my first term, this is my in Montana, it's an elected position, but I saw an opportunity because it is the commissioner of securities and insurance.
Trey Downing: (
And I had even as small as that was experience in both securities and insurance. So it was compelling to me to be in a position where first and foremost, it's a consumer protection agency. That's our mission. It's also a criminal justice agency. We go after bad actors but it gave me a position to, first of all, do what I needed to do to protect consumers, but then also understand what it's like to be an innovator, to be an industry and have to deal with regulators in a very highly regulated industry. And that was really compelling to me because, there is this fine line of what can you do to really foster and encourage and support innovation that doesn't cross that line of something that we need to care about in a commissioner brain.
Trey Downing: (
She spoke briefly of solvency and that's something that a lot of tech people don't think about is solvency of being able to actually fulfill the obligations and pay claims and be solvent. And there's a lot of rules on the regulatory side affecting that. And so you can't lose lose sight of that. And one of the things that I sometimes struggle with when somebody comes and they say, Hey, they have a new innovative product and they want, there's a lot of talk about these regulatory sandboxes, if you don't quite fit into the current regulatory framework. So you have a place to kind of figure that out. And there's a lot of stuff that as regulators we're willing to kind of look sideways at, but the ones that we're not.
Trey Downing: (
And one of the things that I hear a lot are issues that affect either solvency or get into that space of unfair discrimination. And so, when I ask somebody what it is, they're trying to innovate that doesn't cut into those things that are incredibly important to a regulator. A lot of times that kind of fits into the current regulatory environment. I think there's a lot of opportunity to innovate. I think that in some lines of insurance, I think in title insurance there's a particular opportunity of using distributed ledger systems of look using blockchain for solving some problems. I think there's a lot of things that you can do there in terms of predictive analysis. I have like being able to using artificial intelligence and big data to predict risk.
Trey Downing: (
I think it's exciting, but it's also scary. And one of the things that I struggle with and I'm not gonna, I'm not opining on whether this is right or wrong, but, when you have predictive analysis that gets so good and you can really predict risk so good. At what point does it stop being insurance? And just the basic premise of insurance is you have a group of people and you're kind of pooling risk, and you'll assume that some of them will have expensive claims you have some, that'll have some average claims and some won't and that all just subsidizes it. But what happens if you get to the point where through artificial intelligence and just mining this, this big data, that's getting bigger and bigger and bigger, if you can say, well, this person has a 99% chance of having an issue in six months, and this one has a 99% chance of never having an issue. Then at what point, if you use that granularity, is it not insurance? And it's an interesting philosophical question for me. And as regulators, we're trying to navigate this brave new world and really making sure that we are open to innovation that doesn't cross those lines on what we historically and will continue to do to protect consumers. So I've probably spoken too long, so I'll let it go there.
Scott Harrison: (
It's interesting that, there's this there's been this perception that the insurance industry is this antiquated. Some folks have referred to as a dinosaur industry. I'm not interested in technology, not interested in innovation. My experience with the industry as an advisor and a regulator has been, and in some respects, a little bit of a historian has been quite different. The industry has a history of being innovative and being willing to adopt technology and apply it to their business. The insurance industry, for example, was one of the first industries to adopt the use of mainframes when mainframes were a thing or a new thing. There was a point that I, it's sort of a laugh line, but it's not really, there was a point in time when the first mortality table was new innovation and I'm sure someone said, oh, this is scary.
Scott Harrison: (
It's witchcraft, it's made up. It doesn't work well. Now nobody questions. The actuarial science behind a mortality table, we can debate whether it needs to be updated or what, but nobody really questions actuarial science anymore. And so I think this is why we're seeing the appetite with the industry right now is an adopting technology to improve their existing core business processes, pay claims faster get through an underwriting process faster sell a business, sell a product more efficiently, improve the customer, experience, all those things what the industry hasn't really done yet. And I think this is perhaps the next generation I'm interested in. What you think is really getting at the concept of risk itself. We're not there yet companies and whether, are still the legacy industry is trying to figure out how do we use technology to do things faster?
Scott Harrison: (
The inure tech side, the tech side of the business, those companies are trying to figure out why aren't we making any money and how can we, what elements of an insurance company do we need to adopt so that we can be profitable without losing our cache as an inure tech? Right. So that's a very interesting thing that's going on, but eventually I think the technology is gonna get to the point where we can start. People are gonna start to think, how do we think about aggregation of risk? It's not just selling a product faster, or it's completely rethinking categories of products and categories of risk, and maybe even rethinking how that risk, as I said, is aggregated and financed. I'm interested in commissioners, what you all think of that.
Kathleen A. Birrane: (
It's an interesting idea. And we all had dinner last night and we were talking about this exact thing, right. And the difference between granularity and the concept of how deeply do you segment risk and still call it insurance. Right? So, they are interesting concepts. What I see is that to your point Scott, the low hanging fruit, the stuff that is easy to accept and deal with are all the ways in which technology can replace manual processes and affect efficiency etc. But even I do see carriers and I do see inure techs working to be better predictors of risk. And I think Casta, for example, so if you step back and you think about the IC, it's a whole bunch of committees, right.
Kathleen A. Birrane: (
And it's focused on different areas. And this year we've set up a new committee called the H committee, which I'm chairing as the first H committee chair, which I don't know why I agreed to do that. That was a very and we're bringing under the H committee, all of the work that we're doing on innovation, cyber security, data privacy and technology, the uses of technology. Right. And so what's what the part of the thought process about creating this committee was to house it in one place, the work that the regulators are doing at the N a I C, so that we don't have this segmentation of our own in potential for inconsistency. So how do we collaborate and get consensus on some of these ideas like AI principles okay. That are gonna be broadly. So the consequence of that is bringing together lots of different work streams in different areas and being able to see what they've been doing over the last number of years in different areas.
Kathleen A. Birrane: (
And one of them of course is complex predictive models and particularly in the auto space of rating. So I think that what is intriguing about all of that is there's, it's the worry and the concern, whether it's accelerated underwriting or with life insurance or whether it's, how do we rate auto, how do we use technology effectively to right size risk without to your point and your point eliminating the concept of insurance? Like one of the things that I find very interesting and I see companies doing so telematics is an interesting approach, right? So the ability to just get lots and lots of data about individual human beings and their activities and their behavior in their house, in their car, wherever they may be. And then using that information to tell us something about how to rate homeowners or how to rate auto and then eventually how to rate that person. So I think Tesla and we were talking about this last life. Yeah. But you go ahead.
Trey Downing: (
No, well, I mean the whole Tesla story was really interesting. And you see this in a lot of different places where devices are more and more connected. There was a point where humans were creating data and we had a crossover where now machines are creating more data and that data is just growing like crazy. And so you've got a company like Tesla who knows exactly what your driving habits are and has their own insurance program that can dynamically change by how you drove yesterday. And that's really interesting. And you talk about these companies that are starting to say, if you put this device in, you might be able to get cheaper insurance based on your driving experience or what you're sending. And so this is voluntary, and I'm kind of curious, because my expectation is a lot of people opt out, there's privacy concerns about that.
Trey Downing: (
And they opt out for those privacy concerns. They don't want somebody to know where they're driving and how they're driving. But at some point I think, because they're gonna be so good at predicting results by knowing behavior that the Delta in pricing is gonna really compel pretty much everybody to eventually jump into that. And I'm not really clear what our role is as regulators in that. I think that's a natural process that's gonna happen in that industry. Well you worry about the adverse selection then. Yeah. And exactly, so, those are interesting things of having that data and being able to really predict. So just take a step back once a little bit cuz I think there's a really interesting data point is probably 11 or 12 years ago.
Trey Downing: (
I was talking to somebody with one of the big search engines and they were doing research there and he was talking about their predictive analysis and search. A lot of people had this experience, you're talking about trucks and you pick up your phone and it, wants to give you a truck ad and it makes you wonder what's going on. But their predictive analysis was like 97 and a half percent accurate that they knew what you were gonna search for before you type the first letter. And it scared people. They had to detune it because it scared people so much and just constantly massaging this big data, they got better and better predictive analysis on that. And I'm thinking if that was more than a decade ago that they could do that and looking at how all this data is growing now.
Trey Downing: (
It's kind of scary to think about what is possible and what that means to something like this. And as we've all seen how competitive insurance is, I mean, I don't know what it's like where everybody else is from but in Montana you can watch 10 minutes of television and see 12 minutes of insurance ads and they're all on pricing, they're all being competitive on pricing and trying to get you the cheapest product. And when you, if that's really what they're marketing towards and you're looking cheaper and cheaper than having a good driving record, having a device in there, having these telematics installed is gonna put you in the cheapest of the cheapest. And eventually there's gonna be, like I said, that such a Delta, it's gonna compel people to start really looking at that kind of stuff.
Trey Downing: (
And to do just a quick segue, sorry but, one of the things that concerns me as an insurance regulator is a big part of what we do as outreach and education, make sure that consumers know what they're buying and I think equally important, know what they're not buying and you can make any product a lot cheaper by not ensuring things that a normal person would think is being covered. And so one of the things that scares me, there's places where I think there's a lot of opportunity in terms of speeding things up, making things more accurate, making things more effective, but being able to articulate to a person who's on a device, buying their new auto policy of what it means or doesn't mean by the decisions that they're making and not having a human saying really here's your risk by not doing that scares me a little bit. Not to say that, innovators aren't gonna be able to solve that equation, but if everything is going towards cheaper I think that a lot of people are gonna be faced with not having coverages that they would otherwise think that they had. And so there's a little bit of an education problem.
Kathleen A. Birrane: (
That's the value pro. So part of what you have to do as innovators as people are looking is that when you sit down and think about what your product is and what you're trying to do part of the conversation you need to have initially in your head is, how are the regulators gonna look at this? So what are those considerations? What are the concerns? What are the consumer fairness and the consumer protection concerns here? And because as a regulator, sometimes when someone comes in, because I always say to people, I sit to my clients and say it now high touch, high tech means high touch. So you have ideas, you are looking to implement them in my market, come and talk to me, let me understand what it is that you're doing and what it's gonna do in my market. And I don't actually want your investor's speech because that's not what my primary concern is.
Kathleen A. Birrane: (
What I wanna understand is what your product's gonna do. How does it work? How might it impact consumers? And I'll give you an example, a client of mine. I was very happy to approve their product in Maryland shortly after I became commissioner. And they have this absolutely really cool health product right now. It's a supplemental benefit application. But what you do is, you know, you unload the, download the app, and it's an, it's an indemnity. It's a fixed indemnity product, which means that, you know, you've all seen hospital policies. You spend a day in the hospital, you get a hundred bucks. Doesn't matter what the hospital costs is. Doesn't, you know, coordinate with your health insurance, but X happens, you get Y amount. So they did this really cool product where actually it's really every C P T code.
Kathleen A. Birrane: (
Like every kind of thing you could possibly be reimbursed for. They have a flat price for that. So if you have strep, sorry, you go to the doctors, there is X here's the amount that we give you for this. So you go in as a non-insured person, you pay the doctor whatever the doctor is but then they have an app that you can go through and see what all the doctors in your area are gonna charge to for the strep throat. That is a really cool thing. It's a great product or some people. And then there are people for whom if they buy that's a nightmare. So when we sat down and talked about it, we talked about how do you market this and how do you make this accessible? And what does your consumer service look like? So we mapped out the story about how this is in some ways, a specialized product for tech savvy app savvy people.
Kathleen A. Birrane: (
And then all of the ways in which you can wrap customer services and call center stuff around this to make it work for everybody. And that's a small example, but a practical example of how important it was for them to not just talk about the cool wizardry and what my six year old nephew is gonna be able to do easily but I, as a 62 year old slightly less let be honest, much less savvy than like this guy in terms of the use of technology, how is that gonna work across my market and for all of my consumers. So those are the conversations that you need to have. And frankly, when you talk to the business, people at the companies that you're working with that is great. Who else you really need to talk to? Cuz when the deal is done, the deal is done when they're regulatory compliance, people sign off on it, not the pilot,
Scott Harrison: (
Right? Yeah. And I wanna switch gears here, but I want to emphasize that point. I've had a client, they've been a client of mine for a long time. It's a name brand. Everybody in this room has seen their commercials. And I had an opportunity 6, 7, 8 years ago to serve as their interim chief compliance officer, they were making a change. They asked me to come in and restructure their compliance division because of my familiarity with the company. So I spent about six months restructure the compliance division. One of the things, because a lot of work that I had done for the company was compliance related and sales and marketing related and how their products were being distributed. So I was really attuned to this. So when I got in this role, I started to really ask questions about, well at what point in the sales and marketing process and the development process, do the compliance people get involved and the compliance people, the senior managers and compliance said, we don't.
Scott Harrison: (
So I said, that's gonna change. So I went developed relationships with the senior sales and marketing people and said, look because in their attitude was well, we always thought compliance was the right, no business department, right? They were gonna stop us right from wanting to do innovative things. I said, no. I said what their job is to, if they can't do it the way you want to their job is to help you to find a way to do it. That is gonna satisfy the law of Compli law and not get you in trouble. So, what Kathleen is talking about is something that many insurance companies have been in business for a long time are still figuring out. So they're still figuring this out. You have the benefit, you don't have all that baggage, right? You have the benefit of creating your systems. And this is what I advise clients. You have to build this from the ground up the right way. You don't have legacy systems. You also don't have legacy culture. You have to fight that you have to battle against, let me just switch Gears here.
Trey Downing: (
Can I comment one thing on that? I think, what's important in that is that you get somebody involved in that conversation early that understands the compliance part. And for us I can't speak for all the commissioners. I mean, we welcome having those conversations. And we're not gonna design your product for you, but if you've got ideas you wanna bounce off of us, we'll definitely opine whether we think that's right left or somewhere in the middle. And I think that that would really help kind of inform you as you go, because we love having these conversations. My team gets excited when somebody comes in with a new innovative product or an idea, even if it is just in the idea stage, but I would encourage you to reach out early
Kathleen A. Birrane: (
Well and have check in with Scott and track what the H committee is doing, cuz we've set up an innovation work group that is exactly that it's like speed dating with regulators. Right. Okay. So it's all the cool stuff that we want to hear about create safe spaces and really have a bit of a concierge service to help shape ideas and give you real regulators to bounce ideas off to sort of help shape that journey.
Scott Harrison: (
Perfect segue. So my question, what one of my goals or our goals is for the folks here to have an understanding of what you can expect the N E I C to be doing over the next, over the next six months or the year. So commissioner what can you give us a sense of what the mission and the priorities of the H committee and the subcommittees, like the big data working group and others are what are their priorities an what might we be expecting them to do? That'll impact the people in this room over the next six months to a year?
Kathleen A. Birrane: (
So if I would say the two big theme, the three big themes are AI slash ML, cybersecurity and data privacy. So the H committee has a series of working groups. Some of them are mature working groups that came in under other groups. Some of them are newly stood up. So big data AI is focused on understanding how industry is utilizing AI in its various applications across their whole value chain and within the ecosystem. And where are there places where it is appropriate for additional scrutiny or regulatory action, particularly with respect to third party vendors. So what are standards that are being applied by folks? We don't regulate that companies are using in order to develop their models in lots of ways, marketing models, claims fraud, detection, models, much less underwriting and rating models. So, lots of work there.
Kathleen A. Birrane: (
We're taking our AI principles that we adopted in 2019 and beginning to now convert them one step forward into guidelines. And on the cybersecurity end, what we're really doing there is really surveying more deeply what it is that what sort of the events are that are happening and looking at incident response and appropriate responses to different types of events like ransomware, which is a whole subject. We could get into the what's going on there, data privacy, we're redoing all of our models to modernize them, cuz they're seriously out of date. And then I would say the innovation work group that I just measured, I just mentioned probably the biggest project that H is working on right now is pulling together all the work streams that are doing work on algorithmic bias and making sure that we act consistently so that we're stepping back.
Kathleen A. Birrane: (
And our first part of that is to your point who knows about technology, we're going to go on an educational journey with the commissioners and we're gonna spend some time with sort of basic foundational concepts. Like, do you know what an algorithm is? What does algorithmic bias mean? Okay. When we talk about these things, we use words and commissioners will say, well, they're using algorithms, yes, but that's okay. Yeah. And so what are you actually concerned about? You're actually concerned about unfair discrimination creeping in certain circumstances. And now let's talk about what that means. And I think the big conversation that's going on right now is the recognition that we can barely see your taillights. We are never gonna be ahead of you in terms of innovation and innovative uses of technology. So what is the system we put in place so that I can sleep at night because I know that what I've allowed you to do in my state is not hurting my citizens. And so that is not gonna be me testing what you've put out there, cuz I don't have the budget to do that. I don't have the personnel to do that. So what am I gonna put in, in terms of a framework governance elements, certification elements then that's I think really the big conversation this year is beginning to get really serious about what that is.
Trey Downing: (
Yeah. Well, a couple of interesting things is the H committee really technology touches everything and really deciding what is specifically a technology innovation, issue that doesn't touch any of the other committees or work streams or anything else. There's, I mean, it's kind of a big umbrella, which is interesting but one of the things that commissioner brain mentioned, which we think about a lot is industry's always gonna outpace us and we're just trying to make sure we're at least jogging because we can't sprint to catch up, but at least thinking about these issues. And one of the things that, that I think we've been good at and will continue to do is we'll ask for information from industry, we'll bit surveys out there commissioner brain and we co-chair an e-commerce committee.
Trey Downing: (
And so we reached out to industry, here's the things that we're thinking about. What are you concerned about? What are unintended consequences make sure that we are really having a lot of voices there. I think a lot of times people will think, it's the regulator we need to be careful. It's like the IRS showing up. I don't really want to talk to them. They're gonna find out something, but we really encourage those types of communication, cuz at the end of the day, if it's something that doesn't hit our criteria like I said, if it's something that's unfairly discriminatory, if it's something that is gonna circumvent solvency requirements then no matter how you, what angle you come at, we're gonna not agree with that.
Trey Downing: (
And we're gonna stop that to our to the extent of our regulatory authority there. So come in and let's figure out ways you can get can accomplish what you're trying to do. But the hard part for us is we're in the N a I we're 56 regulators and 56 different jurisdictions while with very different backgrounds, trying to really understand and make sure that we're not left so far behind that we're just taken unaware. And some of the big conversations you hear commercial brain was talking about these algorithms, these big scary algorithms, and a lot of people are just worried that they're by their very nature gonna be discriminatory. I don't come from that side, but it is an interesting thought when you have something that's so complicated that it's hard for a normal regulatory agency to really understand what's in that black box. And so what, what is reasonable for us to be able to make sure of the one thing that we care about is that it's not being unfairly discriminatory and those aren't always easy questions with easy solutions. So we're just, like I said, we're trying to stay at a good job if we can't be keeping up at least we're trying to make sure we're staying as far ahead of what is coming next as we can.
Kathleen A. Birrane: (
And I think that's where the pandemic like never let a crisis go to waste. Right? so I think, you know, if you look at stodgy and antiquated cetera, you know, we live in an regulatory environment with rules and laws and regulations that were created, you know, in a, a filing cabinet slash bricks and mortar world, right? We're, we're trying to wind our way through that and dismantle some of that. But in the meantime, you know, react to what's happening in the real world. So you have regulators that were like, you can, we cannot allow companies to go digital. We cannot allow things to get done in this way, because there will be people who will be unfairly treated and blah, blah, blah. And then the pandemic came and nobody could do anything except virtually and TAA. We suddenly realized that actually that was a better way to get things done.
Kathleen A. Birrane: (
So, you find things like states that were saying, but wait a minute, we have to have a wet signature on the annual statement, it's a pandemic, nobody is signing anything and sending that in. So, we had to unwind which is why Troy and I are doing that's exactly what we're doing in eCommerce is we're all these silly places where we are preventing and putting up barriers to the efficient use of technology. Right. That's the other big conversation at the a I C this year is how do we get it out of our own way? Yeah.
Scott Harrison: (
Right. Where's the low hanging fruit. Yeah. There's a principle here that I wanna mention because it goes, really relates directly to what we've been talking about here. And the a core principle in the reg in our regulatory framework is transparency. And it doesn't matter whether it's transparency on the financial side or on your product side or how you market, every company is subject to filing is required to file annual statements on their financial business, their investments, their books and accounts, their books and records also how they do business in the marketplace. Every company is also subject to an examination by their regulator on financial issues, your companies are reg or are examined every three to five years, depending on your state. But there's a core principle that when a regulator comes in and says I want you to show me how you did this, right?
Scott Harrison: (
I want you to show me your claim process. I wanna see your claims manual. I need to understand now we're moving in the direction of your algorithm. I need to understand how you're, what technology you're applying. That's good that you're using for this purpose underwriting claims. As a matter, the company cannot say sorry, we're not allowed to let you see that by statute at every state, the examiner, the insurance department. Now they're required to keep that information confidential. They're not allowed to publish it, but the company is required by law to show that information to disclose that information. So this is an area where folks coming out of the tech world, where they're used to highly guarding their intellectual property for all the right reasons. And we all believe that intellectual property needs to be protected. But when their customer is subject to regulation and I'm sure the same thing exists in the security side and the banking side insurance isn't all that different in this respect. Now their folks need to understand their customer may be asked may well, be asked by the regulator at some point, show me how you did this, and they're gonna come to you their vendor and say our regulator wants to inside the black box.
Kathleen A. Birrane: (
So contract that says that contract term, cuz God knows, I negotiated enough of them that says that you agree to cooperate with the regulators. That's what that means, right. Because to your point, if I say to the company, show me how you did it. The answer is not, I'm sorry. I can't, it's their intellectual property cuz then my answer is okay, you can't use that anymore.
Scott Harrison: (
Right? Yeah. So, part of the reason and again we really think we're running out of time. We really thank Nathan and dig in for this opportunity is to start to have this conversation, start to have a dialogue. I invite you to participate in the N E IIC process. You can do that a variety of ways including through the American inure tech council. But I think what you heard from both commissioners is there is an appetite to hear what your issues are, what your concerns are, what your priorities are, what your ideas are on good policy, because you all come. Most of the folks in this room come from a completely different perspective than the folks who we have all been doing, or at least commissioner bere and I have been dealing and doing business with for 30 years, right. We're insurance people but having the voice of the tech side of this is critical to making good policy and everybody in this room, we absolutely have to have good public policy made in this. And so again, commissioner B, thank you very much, commissioner Downley thank you for coming all the way to Orleans. Thank you very much everybody for coming. Hopefully this was interesting. Thanks.