Insuring the future

What modernization and technology mean for New York's insurance industry.

Many driverless cars

Many driverless cars Karsten Neglia / Shutterstock

The insurance industry doesn’t have a reputation for disruption and innovation, but that may be changing.

Modernization and technology are already altering the way insurers provide their services. Not only do websites and apps allow consumers to compare services from different companies, which can increase competition, but the industry is also confronting the emergence of self-driving cars and the expansion of online services. As the pace of innovation quickens, insurers and legislators are trying to catch up to these changes in a moment that could define the future of the industry.

The insurance industry is reacting to the introduction and expansion of ride-hailing services. The state passed a law last year that allowed companies like Uber and Lyft to operate statewide, excluding New York City which had already established regulations on ride-hailing services. State lawmakers required ride-hailing companies to provide $1.25 million in vehicle liability insurance whenever a customer takes a ride.

Autonomous vehicles have also been in the public eye due to high-profile accidents, which has led drivers, companies and lawmakers to ask whether self-driving cars are safer than having humans behind the wheel. The state budget extended a testing period for self-driving cars until April 2019. To participate, companies need to meet state and federal requirements and have a $5 million insurance policy, which has also prompted companies to develop new types of insurance.

Insurance companies also have increasing opportunities to adopt new technology to improve how they do business. Another key aspect of modernization is consumers’ increased access to information and the shift in demanding a greater level of responsiveness from their insurer.

“A goal of the insurance industry is to increase financial literacy of our policyholders, and we believe one key component of enhanced education is providing the information in a form that is easily accessible on an individualized basis,” said Ellen Melchionni, president of the New York Insurance Association, a trade group.

Allowing information about plans to be sent electronically, which is not allowed in the state, would reduce costs for insurance providers.

“Every time you expand your use of technology, you’re also increasing the potential risk of that data becoming compromised.” – Leslie Moran, New York Health Plan Association senior vice president

Melchionni said the industry faces resistance from regulators. “Despite more and more customers wanting information available through the internet and apps, there is a hesitancy on the part of regulators and legislators to allow companies to use modern means of communicating with customers,” she said. “The inclination by many public policymakers is to instead continue to use paper and mail as the primary forms of delivery.”

The most recent bill that deals with the electronic delivery of insurance information is sponsored by state Sen. James Seward, the Insurance Committee chairman. It would allow insurers to electronically deliver insurance notices and post policies online with policyholders’ consent. A previous version of the bill was vetoed by the governor in 2016.

Assemblyman Kevin Cahill, who chairs the Insurance Committee, said he too is focused on ways the industry can take advantage of new technology.

“For example, we allowed for domestic mutual life insurance companies to offer their policyholders the option to vote during uncontested elections and to send board meeting notices electronically,” Cahill said. “This was a commonsense measure that up until recently was not allowed.”

The health insurance industry has also seen the need to adapt. Leslie Moran, senior vice president of the New York Health Plan Association, said insurers have begun to invest in ways to improve communication and individualize services. This can be done through various methods: Insurers are investing in new apps to schedule appointments, online cost calculators and even holding medical appointments online or via smartphones, which may increase policyholders’ access to doctors and nurses and get patients more involved in their care.

Moran also noted the importance of protecting customers’ information that is stored online. “Every time you expand your use of technology, you’re also increasing the potential risk of that data becoming compromised,” Moran said.

As more and more services are provided online, there is a stronger need to secure information and avoid leaks and data breaches. In 2016, the Independent Insurance Agents and Brokers of New York, New York Insurance Association and the Professional Insurance Agents of New York created guidelines to combat security breaches. The state Department of Financial Services also updated its cybersecurity regulations for financial institutions to require the establishment of a cybersecurity officer, the use of multifactor authentication and the establishment of an incident response plan.

James Seward New York Senate photo
Courtesy of the New York Senate
James Seward
Chairman, State Senate Insurance Committee

C&S: What is your committee doing to keep up with advancing technology?

JS: The Senate Insurance Committee just recently passed my bill (S427) that would clear the way for peer-to-peer personal vehicle sharing. Car sharing, as it is known, would provide a number of economic, environmental and transportation benefits.

I am also working on a bill (S2526) that would allow all insurance notices and documents to be delivered electronically with policyholder consent. You would think this would be common sense in today’s electronic world; however, current law requires documents or notices be “mailed.”  Several consumer safeguards are built into the legislation, which mirrors similar laws already in place in at least 13 other states.

Finally, I am awaiting a report concerning autonomous cars. Last year’s state budget authorized demonstrations and tests of the burgeoning technology with strict oversight by the DMV and the New York State Police. A report is due by June 1, and I look forward to evaluating the findings.

Kevin Cahill New York Assembly photo
Courtesy of the New York Assembly
Kevin Cahill
Chairman, Assembly Insurance Committee

C&S: What is your committee doing to keep up with the creation of new, modern ways of providing insurance services?

KC: The intricacies of insurance administration, as a new technology, had our attention. For example, we allowed for domestic mutual life insurance companies to offer their policyholders the option to vote during uncontested elections and to send board meeting notices electronically. This was a common-sense measure that up until recently was not allowed. We also continue to work with stakeholders and our sister states to deal with an array of cybersecurity issues.

While not a “new, modern way of providing services,” the reality of climate change presents new and modern challenges. The committee has been focused on assuring that companies provide fair, prompt payment that customers expect following natural disasters. With Superstorm Sandy and the recent surge of extreme weather, we are actively advancing legislation to clarify existing law and protect customers during times of crisis. One example is a bill I carry in the Assembly (A391) that creates standard definitions for commonly used terms and phrases found in homeowners’ and commercial line policies. Consistent definitions for terms such as “utility disruption” or “hurricane trigger” will give policyholders peace of mind, knowing that their policy should be interpreted the same way as their neighbor’s following a natural disaster.