March 23, 2020

COVID-19 US: Insurance sector guidance from NAIC’s special session

On March 20, 2020, the National Association of Insurance Commissioners held a special session regarding COVID-19 and its potential consequences for the US insurance industry and insureds. The presentations covered issues such as pandemic modeling, policy coverages, financial impact of the pandemic on the insurance industry, and the readiness of the insurance industry to deal with the pandemic.

On March 20, 2020, the National Association of Insurance Commissioners (“NAIC“) held a special session regarding COVID-19 and its potential consequences for the US insurance industry and insureds.  The presentations covered issues such as pandemic modeling, policy coverages, financial impact of the pandemic on the insurance industry, and the readiness of the insurance industry to deal with the pandemic.  It was an opportunity for state insurance regulators to hear from different representatives of the insurance industry as well as certain other experts. Following the sessions that were open to the public, the state insurance regulators held regulators-only discussions.  Set forth below is a brief overview of the issues discussed at the session.

The session began with a presentation regarding COVID-19 by the Deputy Director for Infectious Disease for the Centers for Disease Control and Prevention, Dr. Jay Butler, which was followed by a presentation by representatives from Risk Management Solutions regarding the pandemic and infectious disease modeling capabilities which help to predict likely fatality rates that have been used by the life insurance industry since 2007.  There was also a panel discussion on the health insurance market; issues discussed included questions of federal versus state authority over coverages, the disproportionate impact on Medicare given the greater impact of the virus on the older population, special enrollment periods under the ACA for those currently uninsured, and the ability of small employers to maintain their group policies if their workforce numbers drop off.  The potential impact of the epidemic on the property and casualty industry was discussed by another panel.

The trade group representatives for the life, health, property & casualty segments of the insurance industry expressed the insurance industry’s readiness to respond strongly to the needs of insureds and insurance marketplace arising from the pandemic. However, they also made certain requests to the NAIC.  For example, they noted that insurers have been receiving numerous data calls and other requests from state insurance regulators from around the country, which have often demanded different types of information and have imposed tight response deadlines; they asked that the states try to coordinate and harmonize their requests to the extent possible.  Similarly, the insurance industry representatives asked that the states should not prescribe the content and form of communications from insurers to insureds regarding coverages and should instead give insurers flexibility in such communications. In addition, they expressed concerns about regulatory and legislative efforts to push for retroactive coverages on existing insurance policies; they explained that the stability of insurers from a financial solvency perspective would be at issue if they were required to provide coverages that were outside their existing policies and for which they have not collected premiums, especially given the financial stressors on the investment side for insurers’ portfolios. 

As for the ability of the insurance industry to maintain their operations and functions from underwriting to claims through the pandemic, including in light of the various “shelter in place” and similar governmental restrictions being imposed in various states, the representatives of the insurance industry expressed confidence that insurers would be able to continue servicing insureds and the marketplace.  It is noteworthy that insurers and the insurance industry are identified as essential services that may be exempted from the emergency restrictions otherwise imposed on employers and workplace in states like California and New York.  From the perspective of the state insurance regulators, maintaining access, affordability and key services (e.g., keeping coverages available in the marketplace and paying claims) during the pandemic are key considerations. The state insurance regulators continue to try to gather information on the foregoing points; for example, the California Department of Insurance requested information from health insurers regarding the foregoing, information which was due on March 20, 2020.

Ultimately, the NAIC is only a voluntary association of state insurance regulators in the US and does not have the power to require state insurance regulators, and certainly not legislators, to act or not to act.  However, the NAIC will play an essential role in trying to coordinate and harmonize the states’ efforts in responding to the pandemic and help to manage the federal government's actions impacting the insurance industry.