The National Association of Insurance Commissioners (NAIC) held its 2023 Fall Meeting on November 30-December 4 in Orlando, Florida. During the meeting, AAIS spoke with Kevin Gaffney, Commissioner of Insurance for the Vermont Department of Financial Regulation, to discuss the biggest challenges facing the industry, how the regulatory community is responding to them, updates on “big data” from the NAIC H Committee, and new initiatives for the state of Vermont.
Biggest Issues Insurance Carriers Are Facing Today
Gaffney admits there are many issues currently affecting insurance carriers. “Climate change and resiliency and mitigation approaches to that are certainly front of mind,” he said. He added that cybersecurity is another one that is impacting Vermont, specifically.
How the Regulatory Community is Responding to These Challenges
Gaffney shared that the NAIC Climate Risk and Resiliency (EX) Task Force is heading up a robust climate change strategy that deals with aspects of both mitigation and the disclosure process of companies being aware of their climate risk. “There’s not a single solution for this,” he stated. “[We have] a variety of challenges that call for both insurance solutions and other mitigation solutions. So, as part of the broader Vermont State Government, we're certainly looking at all of those.”
NAIC Innovation, Cybersecurity, and Technology (H) Committee Updates on “Big Data”
Gaffney spent a year on the H Committee taking over the reins of the work stream for the big data AI survey work. “That work laid the foundation for understanding how artificial intelligence is used in the auto, home, and life insurance markets, and how it's used in various business cycles, from marketing to rating and underwriting, to loss control and fraud detection,” Gaffney shared. “Now that we have this foundation, I think we will probably get a little deeper into use cases and how the industry is using it.” He disclosed that the NAIC will also be looking at the AI Model Bulletin, which was initiated by the H Committee. This initiative provides principles-based guidance and expectations for state Departments of Insurance regarding the utilization of AI by insurance companies.
Key Initiatives in Vermont
Vermont incurred significant flooding this past summer, which has brought a lot of attention. “Vermont's not unusual in terms of the take rate on who buys flood insurance; it's less than 2%,” said Gaffney. “I think there needs to be a multi-faceted solution that both insurance regulators and sister agencies, like the Agency of Natural Resources and [Agency of] Transportation, are going to have to work at in a macro collaborative effort.” Another area that he thinks Vermont is currently in need of is readily accessible data. “When the legislature comes to us and asks us what's going on in the marketplace, we need to be able to respond,” he stressed. “So, I think there's going to be an ongoing effort to build a library of data within the department so that we can know our markets even better.”
To view the full interview with Kevin Gaffney, please click the video above.