Understanding Insurance Regulations: A Conversation with NAIC CEO Michael Consedine

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Text, Wednesdays with Woodward (registered trademark) Webinar Series. 

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JOAN WOODWARD: Good afternoon, everyone, and thank you for joining us today. I'm Joan Woodward, and I'm honored to lead the Travelers Institute, which is the public policy division and educational arm of Travelers. Welcome to Wednesdays with Woodward, our webinar series where we convene leading experts for conversation about today's biggest challenges, personal and professional. 

So before we get started, I'd like to share our disclaimer about today's program. 

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Text, About Travelers Institute (registered trademark) Webinars. The Wednesdays with Woodward (registered trademark) educational webinar series is presented by the Travelers Institute, the public policy division of Travelers. This program is offered for informational and educational purposes only. You should consult with your financial, legal, insurance or other advisors about any practices suggested by this program. Please note that this session is being recorded and may be used as Travelers deems appropriate. 

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I'd also like to thank our webinar partners today: the American Property Casualty Insurance Association, the MetroHartford Alliance, the Risk and Uncertainty Management Center at the University of South Carolina's Darla Moore School of Business, and the Insurance Association of Connecticut. So thank you all. 

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Text, Understanding Insurance Regulations: A Conversation with N.A.I.C. CEO Michael Consedine. Logos for the American Property Casualty Insurance Association (service mark), Travelers Institute (registered trademark), MetroHartford Alliance, I.A.C. Insurance Association of Connecticut, and University of South Carolina Darla Moore School of Business.  

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Now, on to our program. Let's face it, everyone, the insurance industry can be very complex. The laws and regulations governing insurance differ depending upon the state or territory you're doing business in, which can make it very difficult to stay on top of all the challenging trends, the innovations and challenges facing carriers today, producers and customers. 

So to help you make sense of the current regulatory landscape and the latest debates going on in state capitals and U.S. Congress, I'm thrilled to be joined today by Michael Consedine. Mike is the Chief Executive Officer of the National Association of Insurance Commissioners, or NAIC. The NAIC is the U.S.-based, standard-setting organization governed by the chief insurance regulators from all 50 states, the District of Columbia, and U.S. territories, that coordinates the regulation of multi-state insurers. 

The NAIC brings together regulators to discuss industry trends, develop model legislation and regulations, and really to foster dialogue among stakeholder groups. So Mike and I are going to take you inside the thinking at the NAIC, and explore what regulators consider when deciding rates, coverages and new products. We're also going to discuss the key challenges and opportunities insurance regulators are facing today-- and there's a lot of them-- both at the state and federal levels, and really explore the workforce challenges facing the insurance departments following the pandemic. 

As CEO, Mike focuses on strategic planning, policy development and implementation in the areas of state, federal and international affairs and relations. Mike has spent his entire career in the insurance industry as an attorney and a regulator. Most notably, he served as the Insurance Commissioner for the commonwealth of Pennsylvania from 2011 to 2015. 

So, Mike, welcome to our webinar, really great to see you today. 

MICHAEL CONSEDINE: Joan, it's great to be joining you here, as well. Really look forward to our conversation. 

JOAN WOODWARD: All right. So let's get started. So give us a bit of background, first, on yourself and leading the organization-- it's a large organization-- and the mission of the NAIC. 

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Photos of Joan Woodward, Executive Vice President, Public Policy, President, Travelers Institute, Travelers. Michael Consedine, CEO, the National Association of Insurance Commissioners, N.A.I.C. The logo for N.A.I.C. 

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MICHAEL CONSEDINE: Yeah, I'd be happy to, Joan, because the NAIC is really an interesting and important organization when it comes to our state-based insurance system. And it is a lot of things. And probably it's important to start with what it's not. 

It is not a government or state agency. It is formed back in 1871 as a membership organization, really designed at that point to start to pull together our burgeoning state-based system of insurance. And, really, that is where we have our roots in terms of as a member services organization, really. 

There to coordinate the activities of state insurance regulators across 50 states and six territories. 

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Text, The N.A.I.C. Story. The National Association of Insurance Commissioners (N.A.I.C.) provides expertise, data, and analysis for insurance commissioners to effectively regulate the industry and protect consumers. Founded in 1871, the U.S. standard-setting organization is governed by the chief insurance regulators from the 50 states, the District of Columbia, and five U.S. territories to coordinate regulation of multistate insurers. 

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Beyond that, though, we serve a couple other really important functions, one of which is as a standard setter. So we are not a state legislature, or Congress, or anything like that, so we don't pass formal rules and regulations. 

But we do pass and enact model laws, regulations, bulletins, through our members. And then those model laws, bulletins, are taken back to the states for enactment. And as I think we'll get into it a little bit more detail, that's been really important for purposes of setting up some uniformity between the states and how they regulate companies, producers, all aspects of the insurance sector. 

And then beyond being a standard setter and sort of a membership organization, we also are, in many respects, a technology company. The NAIC collects a wealth of insurance and financial data. In fact, I think we are the largest repository of insurance sector data in the U.S., if not the world, when it comes especially to the U.S. insurance market, both from a financial standpoint, market conduct standpoint, producer licensing-- the list goes on and on. 

We use that data and related technology to support our members. So we're, essentially, the back office for the state insurance departments across the country. If you are making files, filings of any type, if you're applying for a license, if you're doing anything generally related to insurance, very likely that the states are utilizing platforms that we develop and maintain on their behalf-- again, in an effort to really have that coordination and uniformity between states.

 

If we move on to the next slide there. 

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Text, The N.A.I.C. Focus. Our members and our mission. Our members are state insurance regulators from diverse backgrounds - but are united in their shared commitment to set standards and ensure fair, competitive, and healthy insurance markets to protect consumers. The singular mission of the N.A.I.C. is to support our members in these noble causes. We also enable commissioners to collaborate and learn from each other, while applying resources to individual states' needs. 

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And our focus of our members is really, again, as their state-based system-- and we'll talk more about what that means-- is focusing on their consumers and their markets. The U.S. is incredibly unique in how we do insurance. 

It's a state-based system, meaning, each state has a regulator that is in charge of regulating her or his marketplace-- the companies that do business there, both on a domestic and foreign basis. And their singular focus is on that marketplace, being both the companies and, particularly, the consumers and protecting them. And the NAIC's mission, really, is to back up that mission of our members. 

We're really take a great deal of pride in supporting our members and the incredibly important work that they do, as you mentioned, Joan, and I had the privilege of serving as a state insurance commissioner for the commonwealth of Pennsylvania for about five years. And I really didn't have an appreciation for-- full appreciation for the work that state insurance regulators do. And so I had the opportunity to be in that role, and it is incredible the impact that they have on everyday Americans. And it is, again, a real privilege for all of us at the NAIC to support them. 

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Text, N.A.I.C. 2023 Officers. Photos of Chlora Lindley-Myers, N.A.I.C. President, Director, Missouri Department of Commerce and Insurance. Andrew N. Mais, N.A.I.C. President-Elect, Commissioner, Connecticut Insurance Department. Jon Godfread, N.A.I.C. Vice President, Commissioner, North Dakota Insurance Department. Scott White, N.A.I.C. Secretary Treasurer, Commissioner, Virginia Insurance Department. 

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What you have here is, when I talk about us being a member organization, a member-driven organization, that's really important to us, our culture. Every one of the 56 state insurance-- territory insurance regulators across the country is an NAIC member. They are all incredibly personally involved in the development of our models, in discussing policy and coordinating their activity. 

Hopefully, some of you have had the opportunity to go to one of our national meetings and have seen the work of these amazing people that they do in a very transparent, very open environment. Something else that we take a great deal of pride is how open we are in terms of what we do in the insurance sector, how we develop our models, how we develop our policies. We really are inclusive in terms of getting the views of all of our stakeholders, consumers, companies, producers, et cetera. 

We are led by a group of officers, and you have our current 2023 officers in front of you. It's a diverse group in every respect. And I think, again, that is one of the great strengths of our organization.

We have members from all across the country, all different political, geographic backgrounds, and they bring that unique perspective to this great table that we all get to sit at. And I think that provides and allows us to have a stronger state-based system when you have all of these perspectives being presented, being heard, sometimes even being challenged. But I think that is for us, I think, one of the great strengths of a state-based system is you get 56 different voices and views, and it's not just a singular one-size-fits-all sort of mentality. 

So I have the privilege of working with each of the individuals and the 52 other members that we have, who are all leaders in their own right, for the year. So, Joan, hopefully, that gives you a little bit. I know I-- we'll get to go into some more detail in each of the-- in some of these areas and look forward to discussing sort of our mission and our members in some more detail here. 

JOAN WOODWARD: That's great. I appreciate the overview because not a lot of us, maybe, on this call clearly understand what it is and what it's not. And so it's great to hear from you. 

All right. At this moment, I'd like to turn the tables on our audience, as everyone knows, and ask you a audience polling question. And so we only have one today, and this is really to inform our discussion. And so we can dig deep or stay a little bit higher level. 

How familiar are you with the regulatory framework around the insurance industry? So are you a newbie to our industry, you need to know from the ground up, or are you a long-time insurance professional? So as I would have imagined, Mike, a lot of people are somewhat familiar, it looks like, with some of the regulatory framework and structure. 

We have several that are very familiar, so that's good. We have very sophisticated people in the insurance industry here. And we have some people that are new, maybe, to the industry.

 So generally speaking, insurance, as we said, is a state level regulatory. How is it different here in the United States versus, for example, the framework that is currently in play in Europe? 

MICHAEL CONSEDINE: Yeah. So, again, I keep making reference to our state-based system, which means insurance is regulated at a state level. And that makes us-- that does make us unique as compared to a lot of other jurisdictions, for example, Europe. In Europe, they have mostly centralized insurance regulation, both at the country level, and then at the European Union level, there's also kind of a central insurance regulator. 

That is replicated in probably most countries, and as we'll talk a little bit about. We are actively involved at an international level with our counterparts. The insurance is a global business these days, so we have to kind of coordinate our activities. 

So when we're at those international tables, typically, we're sitting across from sort of a central regulator for insurance. I think there are definitely pros and cons about that approach. As I talked a little bit about at the intro, we think there's a great deal of strength coming from a diversity of thought, diversity of viewpoint. 

In our system here in the U.S. is really kind of a byproduct of our unique American history, culture, congressional and judicial actions. I mentioned we were formed back in 1871, and that was shortly after a couple Supreme Court cases which upheld, again, that sort of insurance was and should be viewed as a state-based activity. And then that was further affirmed by Congress in the McCarran-Ferguson Act. And you'll hear references to McCarran-Ferguson. 

And basically, that just says insurance is left up to the states to regulate unless, and otherwise, Congress specifically enacts regulation to the contrary. And so there are some areas where you do have a little bit of a federal overlay, particularly, in the health care area. But there is no federal insurance regulator. 

We'll talk a little bit about the activities of the Treasury Department and the Federal Insurance Office, Federal Reserve, and others, all of whom play kind of a role. But if you-- I'm sitting here in D.C. and there is no federal agency that I would go to who is kind of there at a federal level overseeing insurance. And I think that has been, again, to our benefit. 

And as I also mentioned, it's a byproduct of our geography. We keep a list around that shows the top 100 insurance markets in the world. In the top 25, Joan, I think eight or nine of them are actual U.S. states. 

I mean, you think about states like California, Texas, Florida, New York, Pennsylvania, New Jersey, they're all global insurance markets and I think, out of almost necessity, require a state-based regulator. And those markets are unique from one another. What the Oklahoma market is different from the Oregon insurance marketplace. 

And it's, again, I think, a strength that we're able to tailor our regulation accordingly. We like to look at our state-based system as almost sort of laboratories of innovation and entrepreneurialship. So it's worked out well for us so far. 

JOAN WOODWARD: Well, that's great. Thank you for that. I do want to get into and talk about what happened during the Great Financial Crisis 2000, 2008 and 2009. After the financial crisis, of course, a couple of insurance companies did take TARP money. So the federal government, Congress, created this Federal Insurance Office at Treasury, which was established during the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010. 

So what does that office actually do? Because as you said, there's no federal insurance regulator. What role does that Federal Insurance Office play now, and how do you see that's benefiting the state-based regulatory system? 

MICHAEL CONSEDINE: Yeah. So, as you said, the FIO was created post-Dodd-Frank, and there was a lot of debate over what it should be. I mean, it went as far, in some cases, to suggest maybe we should look at an-- almost a quasi federal regulator. There were others who even questioned the need for a Federal Insurance Office. 

So they ended up somewhere in the middle with an office that serves a couple important functions, at least for the federal government. One is, it is there to represent the federal government at an international level on insurance issues. Again, our members represent their states and represent our state-based system. 

So we need somebody at the table to represent the U.S. from a federal perspective, and they do that. So you'll hear, occasionally, references to Team USA, which is basically the NAIC membership, the Federal Reserve, and the FIO office, all of whom coordinate when it comes to representing U.S. activities and U.S. perspectives globally. FIO also has some limited data collection ability. 

They generally have to work through the states before they collect data directly from companies. But that's occurred mostly in responses to natural catastrophes. They're looking at it from a systemic standpoint. 

They also issue the occasional report, and from a market perspective, which we work with them on-- some of those, as well. Currently, they're working on, I think, some reports related to climate risk-- obviously, an important issue, as well as automobile affordability and accessibility for-- on the insurance side. So that covers it. 

Again, they are not a regulator. That's very clear in Dodd-Frank. But they do serve a couple of important roles from the federal government. 

JOAN WOODWARD: OK, thank you for that. So that's the Treasury Department and Office of Insurance. Let's talk about the Federal Reserve. Because when we talk about Federal Reserve, a lot of people just think monetary policy. 

But a few weeks ago, I interviewed Dr. Bob Hartwig who, of course, is a legend in this industry. And he was just appointed to that-- the Federal Reserve Advisory Board on Insurance. So what does the Fed do in terms of oversight of the whole industry? 

MICHAEL CONSEDINE: Yeah. So the Fed has a little bit more substantive role, in that they actually do have some regulatory oversight when it comes to company-- insurance companies that also own bank and thrift institutions. That is where their jurisdiction has come to play. It's not to the exclusion of state insurance regulators. It's in addition to state insurance regulators. 

So we work closely with them when it comes to those companies. They were-- had significantly more authority in the immediate aftermath of the last financial crisis when we had domestic "too big to fail" companies, the SIFI list. And there were about four or five large insurance companies that were designated as SIFIs. 

We don't have those anymore. They were all, basically, de-designated and returned, essentially, to full state oversight. But the institution that was involved in that, which is called FSOC-- we have so many abbreviations and acronyms in our world, as everybody appreciates. 

But FSOC, again, is kind of an amalgamation of federal agencies, as well as having state representatives on there looking at, again, the insurance and financial services sector from kind of a macro prudential perspective, from a systemic risk perspective. They continue to play a role on there-- the Fed continues to play a role on there. And as you mentioned, the Federal Reserve focuses mostly on monetary policy, but they're also looking at the systemic risk issue. 

And so issues like climate are increasingly important to them. But we have a great working relationship with the Federal Reserve. They've been tremendous partners in sort of a shared mission to ensure a very vibrant and solvent insurance sector here in the U.S. 

JOAN WOODWARD: OK. I want to shift a little bit because the tech and the finance sectors, for example, we've seen businesses and consumers really struggle to navigate the complex interplay between state and federal regulatory oversight. And so do you think the insurance sector is at risk of facing those kinds of challenges in the future? 

MICHAEL CONSEDINE: So I think when we're talking about those kinds of challenges, it's probably talking about what's the risk of, again, having kind of a shift towards federal regulation of insurance potentially, or again, more federal engagement in insurance. And we have seen, obviously, kind of a creep of the federal government into insurance. I referenced early on what happens in health care, which is-- again, you've got HHS and CMS involved in some of those products. 

But in terms of do I see Congress stepping in and say, hey, let's have a optional federal charter, or federal insurance regulator, I don't really think the appetite is there at a congressional level. I don't think the interest is there much at an insurance sector level as it maybe was at one point in the ‘90s and 2000s. I think some companies have gotten a little bit of a glimpse of that following the last financial crisis when you did have some federal engagement and increase. 

And I think, to some extent, it made the case for our state-based system. Is it perfect? No. Do we have opportunities to continue to improve on things like uniformity and speed-to-market? Absolutely. 

And I know we have a membership that understands it is a constantly shifting policy landscape. And just because we don't see the threat of federal regulation right now doesn't mean we get to rest on our laurels and do nothing. I think our membership, our officers for the past few years, have been very committed to leading the way on a number of issues that I know we'll get a chance to talk about. 

JOAN WOODWARD: So you mentioned Congress, we have a new Congress, new leadership installed. So what legislative proposals do you see on the horizon in Congress? I mean, obviously, they've worked very hard on the National Flood Insurance Program, and TRIA, the Terrorism Risk Insurance programs.

But what, if any, do you see any federal legislation in the next, say, 18 months? And what about the state in terms of a major regulation changes in the state levels? 

MICHAEL CONSEDINE: Yeah. The Congressional dynamic is going to be really interesting one. I mean, I think for the last few years, just because of the power sharing shifting that we've seen, it's been very hard to get meaningful, comprehensive legislation of any type through Congress. It is-- there is gridlock. It definitely has affected all sectors, insurance included. 

So I think getting something like a Dodd-Frank Act through right now would be very, very challenging, just because of the political divisions that we have in Congress. That's not to say, though, Joan, there could not be a weird collision of interest on issues, for example, like big data, or cybersecurity, things that, frankly, transcend just the insurance sector. I know you're seeing an interesting coalition of interests and members around, as I said, more regulation of big data and data privacy. That's not an insurance specific issue, but it's very likely that the insurance sector, it could get caught up in something like that. 

So we're in very involved in reminding members of Congress, particularly new ones who don't understand, or may not be as aware of the system, again, that we have a state-based system, and that the insurance regulators at the state level are probably in a very good position, even with things like data privacy, to ensure that the enforcement is appropriate, and that consumers are protected. Beyond that, I think we are watching, mostly, what's happening at an agency level. While there's probably not a huge likelihood that Congress is going to do anything really, really huge in the near future, I think this-- the Biden administration has empowered a lot of agencies to aggressively push the envelope when it comes to their own rule-making and pursuing this administration's agenda when it comes to issues like climate risk and consumer protection. 

So we're working very closely with federal agencies, most of whom we've got a really good working relationship, to make sure, again, that there is a balancing of interest and a recognition in that many cases we already have a state-based effort underway to address some of these issues. 

JOAN WOODWARD: OK. I want to pivot a little bit and talk about a really hot topic in our industry right now-- risk-based pricing. So as you know, risk-based pricing is really considered to be a foundational pillar of the insurance industry. But there's recently been some pushback in recent years against this practice. 

So why is that, and what are you doing to kind of educate folks about the fundamental pillar of risk-based pricing in our business? 

MICHAEL CONSEDINE: Yeah. I mean, to be honest with you, Joan, I don't get a sense from our membership, generally, that anybody is pushing back on fundamental-- the fundamental underpinnings of insurance in terms of being a risk-based product. That is the very nature of insurance. I mean, it's-- I've had to sit in front of Congress as part of testimony and explain why, essentially, discrimination, fair discrimination, is part of the business model for insurance.

We have a lot of laws on the books that prevent things like unfair discrimination. But at its heart, insurance is about risk and discriminating, to some extent, between good risks and bad risks. But there is, I think it's fair to say, a deeper look at how insurance companies and related entities go about applying risk-based practices in ways that may impact protected groups more than others. And I think that's a concern. 

So you have had some members, not at a national level, look at things like credit scoring, and whether or not credit scoring has more of an impact on certain, again, protected classes than others. And there have been state-based actions taken in response. I think the more data, the more information we get, the more transparent the industry is, the more educated and informed our membership is in making decisions about risk-based practices and pricing going forward. 

But there is no move away from that. I mean, you couldn't. I mean, that would basically turn insurance on its head. But I think there is a sensitivity to-- particularly, as we're using more and more sophisticated in a black box, big data-driven model, to make sure that there isn't something happening in the background there that, as I said, is kind of resulting in unintended proxy discrimination against protected classes. 

JOAN WOODWARD: So actually, on that point, so what steps are the NAIC, or regulators, taking to ensure the customers really are being treated fairly and equitably in the underwriting process? And I know this is a really important topic, and we want to make sure we hear your thoughts on this because there is a role to play, right, to make sure people are treated fairly. 

MICHAEL CONSEDINE: Yeah. So I think, as I said, this is playing out most visibly when it comes to companies’ use of big data, quasi AI-type black box algorithmic approaches to underwriting and rating. And we've had, I think, what has been a very constructive discussion and debate at an NAIC level in a very transparent manner over the last couple of years. In fact, we formed, for the first time, I think 50 years, a new letter committee. 

So we worked through a series of committees, each kind of focused on a particular aspect of the insurance industry. And we formed our H Committee, which is kind of cross-sectoral in its focus on data technology and cybersecurity. And it's been led the last couple of years by Commissioner Kathleen Birrane out of Maryland, who has done a masterful job of engaging the stakeholder community and understanding both the benefits of using this kind of technology, the efficiencies it achieves, potentially getting to underserved communities.

 But also, the risk, as I said, in terms of potentially impacting protected classes. So it was-- in our last national meeting, I think we're going to move forward from sort of these principles we've developed to more of, potentially, a model bulletin of some type, which will provide guidance to the insurance sector on how to use these models in an appropriate, ethical manner so that we don't have this unintended consequences. But I think our approach is one that is principle-based. 

It's not highly prescriptive. It's certainly not designed to quash innovation in the sector. That's something that we think has significant pro-consumer benefits, if done correctly.

But we have to balance that against the consumer protection interests that our members have, particularly, given that we do have an affordability and accessibility crisis still in this country when it comes to a lot of insurance-based risks. And that, again, is something that is of great importance and concern to our membership. 

JOAN WOODWARD: Wonderful. Thank you for that. It's really good to hear and good to know that all that work is being done behind the scenes, so thank you. 

I want to shift now and talk about the insurance departments themselves because as you all know out there, all the employment changes, the worker shortages, the labor force shortages right now, from an employment perspective post-COVID, a lot of-- we've had a lot of early retirements, career changes across the board in our industry, across all industries because of COVID. So how are the departments impacted by this specifically? Is there churn among the departments, or does it vary by state? What are you seeing across the board? 

MICHAEL CONSEDINE: Yeah. I mean, this is one of those issues that, as a CEO, keeps me up at night, not just for the sake of the NAIC. And we've had sort of-- we faced a lot of the same pressures that all employers have faced. But the same is true of our departments, as well. 

I mean, the backbone of our state-based system are the women and men who are serving in those departments and protecting consumers and monitoring companies. And it is an area that requires, in many cases, a fair amount of expertise and skills. Increasingly, we're looking, like everybody else, people with technology backgrounds, with analytical backgrounds, even data scientist type backgrounds in some cases. 

So it's tough enough to compete for talent, even in the pre-pandemic market. Now, of course, as you're dealing with the great resignation and quiet quitting and everything else that's happening, yeah, it is having an impact on our departments and on our members, just as it is in every employer. And I think to their credit from what I'm hearing from our members, and they're working with their governors, where they're not elected, to start doing the same out-of-the-box thinking that every employer is having to do to keep, retain and attract talent. 

One of the great benefits I think we have, generally, and this is not just for the government, but I think as a sector, is the value proposition of insurance. And we had, last year, Director Dean Cameron, who was our president last year, a passionate guy, been involved insurance his whole life and just feels deeply about how important insurance is to everyday Americans and protecting them and their families. And we need to do a better job across the board, and government included, about selling the value proposition of being part of an industry there that is there to protect Americans, and the privilege that we have at a state level in being involved in developing policies and taking actions that allow us to do that as a sector.

So I think there is an opportunity for us to up our game when it comes to making the case for what we do and how we do it. And that, I think, in addition to workforce policies that we're all still struggling with in terms of allowing more flexibility in working on a hybrid fashion. But, yeah, this is something that we're all going to have to watch play out over the next few years because there is an enormous talent gap that exists in the marketplace already, and one that we, as a sector, have to be very focused on. 

JOAN WOODWARD: Yeah. And as you know, if the insurance departments aren’t properly staffed with individuals that are skilled-- have the right skills, just like in any business, I mean, this could be a real difficult problem for the agent broker community, for the carrier community and for the consumers. So what are you guys doing? I mean, we hear a lot from our agent brokers about attracting new talent, and they want to know what strategies are you employing to get that new talent, that younger generation, in our industry? 

Have you found any magic bullet there, or are you recruiting at different schools around the country? There's a lot of risk management schools out there, luckily for us, that we tap in, as well. So is there anything that you can share with us in terms of getting-- not just getting young people to come to our industry, but having them stay in our industry? 

MICHAEL CONSEDINE: Yeah. 

JOAN WOODWARD: It's a real issue for all of us. 

MICHAEL CONSEDINE: Yeah. No. Well, I think one of the proudest accomplishments we have coming out of last year was the NAIC formed the NAIC Foundation, which was created specifically to attract talent, and talent from underserved communities, into the insurance sector. It's still in its launch phase. We've got three great directors who are outside directors, who are leading our efforts-- former NAIC members Terri Vaughn, George Nichols and Ray Farmer, all who, again, are passionate about this issue, recognize the need. 

And I think for us, as you said, there's no silver bullet here. There's maybe a bunch of silver BBs that we can combine to achieve the same effect. But one is getting in early to high schools and communities and providing opportunities to come work in the sector. So I know the NAIC Foundation are looking at sort of mentorship opportunities, internship opportunities, and that creates this pipeline. 

And, sure, we're doing the same things in terms of being out at the schools-- historically Black universities-- really focusing on raising awareness about the community we serve, many of which they come from directly, and the opportunities in the insurance sector. And then, yeah, we have to-- once you get them in the pipeline, you have to figure out ways about retaining and elevating the talent as they move through. So we're continuing to work on how we're involved in this. 

But I mean, for us, this is an area where we have a collective interest with the larger sector, and we're looking at ways in terms of how we can work with companies and universities, with consumer protection groups, to identify ways that we can work together to meet this need. Because you're right, for us, it really is mission critical that we've got people doing these jobs to protect consumers, to protect our markets. 

If we don't, those are the fundamentals we absolutely have to get right to make the case for our state-based system. If we fail at that, then we end up making the case for some alternative approach, which, I can guarantee you, is not going to be probably in the best interests of Americans. 

JOAN WOODWARD: Yeah. Here at the Travelers Institute, I think over the past 15 years we've been to about 90 different universities. And that's actually the most energetic I am when I'm speaking to students about the career. So thank you for that. We appreciate, on behalf of the entire industry, helping us bring more young folks in. 

1. Now, I want to shift and talk about another really hot topic out there, which is cybersecurity. So we, at the Institute here, at Travelers Institute, do a lot of symposiums, educational forums, talking about cyber-risk, and cyber insurance, and cyber hygiene for businesses. What are some of the issues that you're seeing out there now focused on the cyberspace? 

I mean, some people are even saying cyber might not be insurable into the future. I mean, how are the regulators thinking about cyber? 

MICHAEL CONSEDINE: Yeah. I think it is certainly a fair question, and we have definitely seen a pullback in the cyber insurance market from its launch maybe a decade ago. The products, I think, appropriately so, are getting much more tailored to kind of capture and minimize that risk that is significant out there. I think more broadly, though, Joan, I mean, cyber is one of those-- I kind of have a short list of existential threats to our insurance sector and to our state-based system, things that if they go horribly, horribly wrong, we're all in big trouble. 

And a massive cyberattack that impacts consumers from both an insurance perspective and impacts the industry directly is not at the top of my list. It's at the top of a lot of people's list who matter when it comes to looking at the insurance sector. So our membership is appropriately really focused on, as you said, making sure that the insurance sector is really on top of this issue. 

And having worked for a global insurance company, I know it is a top-line discussion for most boards of directors and senior management. And it should be. I mean, we have seen the impact of isolated cyberattacks on specific companies and what it does to their reputation, what it does to their consumers. And nobody wants to have that mess. 

But it is an ongoing, in some cases, uphill battle when you're looking at sort of the aggressors on the cyberattack side. And they have targeted the insurance sector as sort of a goldmine of information that they can exploit. So I don't see any time in the near future where the insurance industry and insurance companies, large and small-- and we are increasingly seeing small and mid-sized companies subject to ransomware and insurance cyberattacks. 

So nobody is immune. Everybody should be prepared. Everybody should have absolute attention to this-- as I said, a topline issue. 

We have developed a cybersecurity model at the NAIC about six years ago. I think about close to 30 states have now adopted it. There's still more work to be done. 

I think this is an issue where everybody should be on board with doing at least kind of more than a bare minimum but taking significant action to protect themselves. And really our model is there to establish a baseline on a coordinated basis. And as I said, this from an existential threat area, it's like if we don't get this right, I can assure this would be an area where the federal government would, maybe appropriately so, step in if we're not able to regulate this aspect and this risk appropriately. 

JOAN WOODWARD: OK. We're going to stay tuned on that, for sure. Another technology question for you. We're hearing a lot about blockchain technology and its potential applications in our industry. So what is the NAIC doing on blockchain? 

MICHAEL CONSEDINE: Yeah. So I mean, blockchain, that was one of those where you had to kind of-- if you were cool, you had to work into at least every presentation for a few years, I think. I still think it has a ton of potential application. To be honest, though, from a regulatory standpoint, we have not seen sort of an application yet that I think demonstrates the potential that has been promised out there. 

That's not to say, though, that we aren't interested in looking at emerging technologies like blockchain and smart analytics to make the sector more streamlined, to make it more efficient. The issue with blockchain, frankly, is probably more on the company side, it seems, to really be effectively launched because it requires a lot of transparency, a lot of openness to sharing information across the blockchain. And I think we've seen some resistance to that. 

And I think we are open to its applications and potentials on a regulatory side, but I think there are still some pilot projects out there that we're kind of watching and evaluating to see how they pan out and what the potential applications are to the insurance sector, though. But I mean, from a broader perspective, are we looking at regtech and emerging technologies that could make insurance regulation more efficient, smarter, better? Absolutely, we are. 

It's a big part of-- as I said, as a technology company, we've got a CTO who is out there on the cutting edge when it comes to data analytics and empowering our members to be able to look at their markets, to look at what's happening in their markets, and whether consumers not just from a real-time perspective, but from a predictive perspective. And that's-- I think that's the future for us. And again, harnessing that technology is a big part of how we stay competitive as a state-based system. 

JOAN WOODWARD: OK. I want to take a bunch of audience questions so drop them in the Q&A, if you have a question for Mike. First one's going to be just about back on technology. What are your thinking about artificial intelligence and this new ChatGPT technology?

Do you see applications for us in the insurance industry? Is it-- are they opportunities, or are they scaring you? 

MICHAEL CONSEDINE: I got to play around with ChatGPT pretty early on after its launch about six months ago, and it's a game changer, Joan, I think. Not just for the insurance sector, but its ability to create content almost instantaneously is pretty awe-inspiring, if not terrifying, at times. And I've had it-- write speeches and do analytical pieces. 

The accuracy of which you have to really know your sort of the subject matter to be able to question, because what it generates is pretty impressive, as I said. So I think it does have the ability to be fairly transformative, particularly, when it comes to product design, sort of consumer-facing materials, even analytical pieces. I see you've got an upcoming sort of session on ChatGPT. I'll probably tune in for that one because I think we're just starting to understand the potential for almost near AI platforms like that one, and everybody’s racing to sort of create what comes next. 

And will we have application in the insurance sector and on the regulatory sector that could be helpful and, again, a speed to market and efficiency standpoint? Absolutely. And we're already using platforms like that that can analyze product filings that took a policy analyst maybe a week or two to compare dozens of filings against each other, identify the differences, provide an analysis of what those differences mean. They can do-- we've seen products that can do that instantaneously. And I think for our members that has a potential to, again, make regulation more efficient and faster. 

JOAN WOODWARD: Well, first, thank you for giving us an advertisement because we are going to have our internal Travelers data scientists on March 1, and we're going to have a whole session on ChatGPT. See, we read your surveys. When you fill them out, you tell us what you want to hear, we put it on the agenda. So thank you for that shout-out. 

OK, another question for you, Mike. This is a good one from Stephen Simchak. 

MICHAEL CONSEDINE: Oh, hey, Steve. 

JOAN WOODWARD: Going from PA Commissioner to President of the NAIC, what surprised you most? 

MICHAEL CONSEDINE: Oh, gosh. I guess, probably, I thought as-- there's kind of an evolution, as in any NAIC member, that you come to understand the breadth and scope of NAIC services and what we do to support our state-based system. I worked first as an attorney at the Pennsylvania Insurance Department, had some peripheral familiarity with the NAIC, kind of thought it was mostly, as I said, sort of on the standard-setting side. As commissioner, and also as an NAIC officer, I came to an even greater understanding, again, of how the organization supported our state-based system. 

But it really wasn't until I got into this job and got to work with the amazing team that we have at the NAIC. We have a little over 500 employees in three offices in Kansas City, D.C., where I am today, and New York, all of whom have different areas of expertise. But really when I started and just learned, again though, how we essentially are the back office for insurance, all of the different training programs that we offer, not just on traditional insurance stuff, but how do you use social media and things like that. 

What we do when it comes to capital markets, the wealth of abilities that our New York team has to understand what's happening on Wall Street, it's just-- it's breathtaking the expertise that this organization has to support our membership and is really an amazing asset for all of us. 

JOAN WOODWARD: Yeah, we see it firsthand, so you've assembled quite the team, really. And we benefit from that tremendously. Another question coming in from Terry Buckner.

 Is there appetite to support a national license option for brokers rather than have 50 states to do this separately? And we've got this question a number of times today. So talk about why not have a national licensing program. 

MICHAEL CONSEDINE: Well, there's one, actually, in the works, which is NARAB so-- which is, again, sort of a federal-level mechanism through which producers will be able to get multi-state license. NAIC supported the formation of NARAB. The issue is still with the administration and, to some extent, Treasury to get it off the ground. 

And so there is legislation-- there's a law on the book that would form-- that forms NARAB, but they actually have to constitute it, its board of directors, and get the thing off the ground. And once it is, then there will be this mechanism and it will feed directly into our current state-based systems for licensing purposes. So write your congressmen and encourage the Treasury Department, and the administration to move forward with getting NARAB up and running. 

And we at the NAIC, once they take that action, certainly will lend our support to having some of our members serve on the board and getting this thing going. 

JOAN WOODWARD: OK. A number of questions coming in about California. So why is California so different when it comes to regulation? And why are they so slow to approve rate filings quickly? A lot of questions on that one, Mike. 

MICHAEL CONSEDINE: Yeah. Well-- and I'm certainly not going to opine on our individual members, other than to say, I know each one of them is committed to their markets and to protecting consumers and doing what they believe is the right thing for their marketplace. I work closely with Commissioner Lara, and I know he is passionate about the insurance sector. 

California, like many areas of the country, I think, is facing, as I said, kind of-- it's on the front lines of this affordability and accessibility issue. My home state of Colorado also not immune to it and driven by a lot of climate-related risks. And that is something, I think, they're working through because as I said, that is also one of those existential threats to our entire sector.

 If we have companies only writing the very best of business and the cherry-picking kind of approach and not using traditional concepts like risk pooling and risk sharing. And now we do have the ability at the company level to underwrite and rate risk at sort of the individual risk level, and not sort of do it from a risk pooling standpoint. We're seeing more and more areas of the country where people can't find automobile insurance, or can't find homeowners insurance, or can't find it cheaply. And I think that is in the backdrop of a lot of these issues that our members are grappling with. 

JOAN WOODWARD: OK, thank you for that. Another question coming in from Brenten Slutsky. How do we make suggestions to the NAIC, particularly, with regards to the transportation network company, what is the transportation network company, and how do they make suggestions to you? 

MICHAEL CONSEDINE: I think TNC is-- I mean, this is the Ubers and Lyfts of the world. And we actually were very engaged on this issue, probably, about five years ago when there were a lot of questions being raised about coverage gaps and sort of risks to consumers. And we took action at that point to, again suggest, I think, either a model law that ultimately a number of states did pass that addressed, again, more consumer notice and addressing this gap issue. 

But with regard to the question about how do you get engaged? One of the things we are most proud about at the NAIC is sort of the openness and transparency of our process, and the accessibility-- the availability of our members. So these national meetings are a great opportunity to raise these kind of issues, or raise them directly with your state insurance department. 

I know as commissioner I took a great deal of pride in hearing from consumers at all sort of levels, and understanding what their issues were, and allowing us to bring them to a national discussion table, which is what the NAIC is all about. 

JOAN WOODWARD: OK. Another question coming in. What are the top three things that the industry players, the carriers, our agencies, can do to help state regulators ensure that level playing field? What are the things that we can ask of people on this call today? What would you like to see more of?

MICHAEL CONSEDINE: Well, I just touched on one of them, which is engagement. I mean, again, make your voices heard. We-- it is the strength of the state-based system that we hear all voices before we make decisions, and that allows us to make informed decisions. 

So engagement either directly, or through your trades, or through your companies, is certainly something that we would ask. It's easy to complain, but there are lots of opportunities to get involved and make your voice heard and, ultimately, make a difference. I'd also say education.

I've talked a couple of times during our conversation, Joan, about how we, as an organization, have benefited from hearing from the industry on what they're doing on things like AI, or what they're doing when it comes to certain product designs. We are out there as advocates a lot for our state-based system but also for our insurance sector. And so the more we know and our members know as regulators, the better we are able to address sort of the emerging issues and practices and make informed decisions. 

And then, probably, the last thing, I think, is just sort of the shared commitment to consumers and protection. I mean, as I said, I personally am passionate, and many of our members are passionate, about the work we do in the insurance sector, what everybody on this call does to serve consumers. And I think if we have that shared commitment that we are here to protect American families, that is something that is a strength for all of us. 

And if we can all get around that as a foundational part of what we're doing here, I think we can make a lot of progress on these issues. 

JOAN WOODWARD: OK, thank you for that. Another question coming in from Darrel Seife. Please comment on the current health of and the future plans for the surplus lines platform. 

MICHAEL CONSEDINE: Yeah. There's a lot involved in surplus lines. And again, these are generally products that you can't find on a traditional insurance market. Yeah, and increasingly, I think there's a need for that. 

If you can't find it through the traditional marketplace, you've got to go through the surplus lines marketplace. And there are-- that's-- the regulation there is a little bit differently, recognizing again, sort of they’re not traditional markets. But I guess my one observation would be going back to the concern that I think some of our members have is the more consumers have to go to sort of platforms outside of the traditional market for their needs to be protected, be it surplus lines or government programs, I think the more attention we are going to get, appropriately so maybe, from people like people in Congress and elsewhere as to, well, if the insurance sector isn't doing this job anymore, what are they doing, and why do we need them? 

So maybe a little bit of a soapbox moment there on a more general question. But that is something that I think we all have to be very, very cognizant about. 

JOAN WOODWARD: OK. Another good question coming in-- thank you for that-- from Deb Hagen. Deb wants to know, how do you believe the insurance industry will regulate more driverless cars and trucks? So autonomous vehicles, right?

We've been waiting for them to come online for-- we've talked about them for the last five, seven years. What's the insurance industry regulatory structure, what should it look like? Any difference? 

MICHAEL CONSEDINE: Yeah. Probably different. How different and what it's going to look like, I think that's another area where we get to have a very good discussion with everybody involved to figure that out. We're already seeing, for example, the Teslas of the world, essentially, acting as their own insurance companies for their vehicles, and the viewpoint that truly driverless cars don't require insurance as much as they do, maybe a warranty-type product. 

Do our members necessarily agree with that? Probably not, but we're not quite there yet, which I think is probably a good thing because I think we're going to need some time as we see that emerging more and more to figure it out. 

JOAN WOODWARD: OK. Another question coming in from Charles Boychenko. What differences do you notice when working with elected insurance commissioners versus appointed ones? Is there a difference, generally speaking? 

MICHAEL CONSEDINE: Yeah. Again, I think for me personally, one of the most amazing things about the NAIC is typically when we have all of our members come in and sit around a table, they come from different states, different politics. Some are elected, some are appointed. But at the end of the day, they're all regulators. 

At the end of the day, they all share a common focus on their consumers and marketplaces. And I would be less than candid if I didn't say, occasionally, sort of domestic politics doesn't come into the discussion. But more often than not, we're able to work past those issues and reach really good conclusions for consumers in the marketplace, which has allowed us, as an organization, to endure, when we've seen otherwise, a lot of divisiveness and politics kind of become very toxic for other institutions. 

We work very hard, and I know the officers I showed at the beginning, and the officers we've had in the past, recognize the very unique aspect of our culture that allows us to collaborate. If you look at our minutes from that first meeting in 1871, that was a concern then that somehow we would get divided and politics would be-- sort of interfere with just rational regulation. We've avoided that. 

We work hard every day to ensure that the unique nature of the NAIC as a very collaborative consumer-focused organization endures. 

JOAN WOODWARD: Well, the last comment I'll say here from the audience, a lot of thank-you's for kind of letting us in and seeing what's under the hood of the NAIC, and just the confidence that people are saying they have in you to lead your organization, and the 600-some experts on your team. And we're lucky as an industry to have you build that team for us, and we rely on it. So a lot of comments coming in around that, Mike. 

MICHAEL CONSEDINE: Oh, that's very, very kind of everybody. And again, my appreciation for the work they do. As I said, we recognize that you all are out there protecting people like me and my family, and we're grateful for the work that you all do, as well, so thank you. 

JOAN WOODWARD: Well, listen, the hour has just flown by, and I just want to thank you again. It was really, really enlightening, and we'd love to have you back and maybe dig deeper on some of these topics that we just skimmed the surface on. But, Mike, thank you so much for your time and your commitment to public service. 

MICHAEL CONSEDINE: Oh, well, thank you so much, Joan. It's been a great pleasure, and look forward to joining you again. 

JOAN WOODWARD: All righty, folks, thank you, again. We're going to talk about the next four webinars we have coming up because they are really stellar, just like we had today. 

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Text, Upcoming Webinars. February 15, Economic Outlook 2023 with Former White House Senior Economist Dr. LaVaughn Henry. March 1, Making Sense of ChatGPT. March 15, Cyber Risk Report: A View from the U.S. Government's Lead Cyber Agency. March 22, Lessons for Your Business Toolbox: A Conversation with Stanley Black and Decker President and CEO Donald Allan, Jr. Register: travelersinstitute.org. 

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February 15, in two weeks, we're going to hear from Dr. LaVaughn Henry, former Senior Economist at the White House Council of Economic Advisors. He's going to talk about his 2023 Economic Outlook. Don't miss that. 

Then you just heard on March 1 we're going to take on ChatGPT. What is it, what can it do for the insurance industry? And we have two of our data scientists at Travelers that have agreed to come on and talk about this new AI technology that could really be revolutionary for the industry. 

Then on March 15, we're going to go back and talk more cyber. We have experts from CISA, which is the federal government agency that oversees all cybersecurity policy, to talk about the current threat landscapes and what's going on. 

Then on March 22, I'm going to sit down with the Stanley Black & Decker President and CEO, Don Allan, to discuss what it's like to lead a major manufacturing company in today's world with supply chain issues still around-- but he's navigated that beautifully for that company-- and just getting under the hood there and lessons in leadership. 

So registration is open. We invite you to join us, and we're thrilled to have so many of you join us today. So as always, give us your feedback. We read every single comment. 

So we'd love to know what you want to see from us in the next six months or so. Take care, my friends. Have a great afternoon, and we're going to see you in two weeks. 

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Watch Replays: travelersinstitute.org. Connect LinkedIn, Joan Kois Woodward. Take our Survey: Link in chat. Hashtag Wednesdays with Woodward. Logo, Travelers Institute (registered trademark). 

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