Immediate, widespread access to information is at the heart of the Internet revolution, and now that revolution is extending to the obscure world of insurance filings.
As of this publication, at least six states--Arkansas, California, Florida, North Carolina, South Carolina, and Wisconsin--provide access on open websites to documents and information submitted by insurance companies in rate and form filings.
No fee or arranged access is required, but it helps to know what you’re looking for. While public access is intended to benefit consumers and citizens, few non-specialists
can navigate through the categories of filing documents and make sense of the technical information found therein.
For insurers, however, the new ease of access to information submitted in filings could have an impact on product development.
Insurance filings have long been public records open to public scrutiny, and insurers have commonly reviewed competitors’ filings as part of their product research and development, according to Larris Larsen, AAIS assistant vice president of compliance.
Years ago, however, the task of reviewing hundreds of pages submitted on paper placed practical limitations on how quickly and systematically insurers could review--and copy--the work of
their competitors.
“They had to go through volumes of paper and photocopy what they wanted at 10 cents a copy,” Larsen says. “With some states, they had to make an appointment and specify which filings they wanted.”
That did not change entirely with the advent of electronic filings. Until recently, one still had to go to an insurance department to view information filed electronically, or pay one of the private services that maintained databases of state filings.
Either way, the practical impediments to copying and implementing product features provided some margin of benefit to companies and organizations that invested resources to develop new policy provisions or rating information.
“You could still have two years to sell a filed product without competition,” Larsen says. “Now, with Internet access to filed information, your competitive advantage may last 60 days.
“This might inhibit companies from spending the time needed to develop new products and features.”
According to Larsen, niche writers that develop products based on proprietary data and knowledge of unique classes are most at risk of seeing their competitive advantage eroded by easy and widespread access to information submitted in filings.
Beyond those companies, however, widespread access to rate and form filings is not yet a great concern to most property/casualty insurers, says Lynn Knauf, director of personal lines for the Property Casualty Insurers Association of America (PCI).
She says that insurers are resigned to the fact that “people digging for information have the time and the resources to do it.”
Of more immediate concern, she believes, is the fear that legislators and regulators will expand the breadth of competitive information that must be filed to include, among other things, risk classifications and underwriting guidelines.
As an example, Knauf cites a Texas bill introduced in a recent legislative session that would have essentially required new underwriting techniques to be filed and approved before being utilized.
“That crosses the line between underwriting and rating,” she says.
Insurance advisory organizations have a more pressing concern about the ease of accessing traditional filings, because the development of filed forms and rates constitutes their principal
or sole source of income.
When one goes to the website of the Florida Office of Insurance Regulation and searches for a rate filing submitted by the Insurance Services Office, Jersey City, N.J., you get a message stating that “legal issues prevent these filings from being made available through this Internet search utility.”
Viewers are advised, however, that the ISO filings are available for inspection at a department office in Tallahassee. In other words, an important distinction is being made, at least for the time being, between having information publicly available and making it easy to access.
AAIS has made a similar distinction in its reaction to an initiative by the directors of “SERFF,” the System for Electronic Rate and Form Filing, the countrywide electronic filing service created under the auspices of the National Association of Insurance Commissioners (NAIC).
Earlier this year, the SERFF board of directors proposed to institute a common countrywide platform for providing information from filings made via SERFF in response to freedom of information request.
“From the state perspective, if the information is available via a web interface, they’ll no longer have resources tied up in locating, printing, and mailing rate/form filings to satisfy requests,” reads a statement from the SERFF directors.
In a response to Thea Cook, the NAIC’s product implementation supervisor, Larsen stated that information filed by advisory organizations should not be made available in that fashion.
“While this material may be available through contacts or visits to individual states, open distribution via the Internet of all AAIS materials would place [AAIS] at a competitive disadvantage,” Larsen wrote.
“Competitor advisory organizations and non-subscribing insurance companies could, with little efforts and at no cost, receive all of the materials that AAIS expends extensive resources to develop.”
In short, advisory organizations maintain that the manner in which their information is made available is an important consideration on its own, apart from the content of filings.
Not everyone sees it that way.
Any attempt to restrict access to public information by limiting electronic distribution amounts to “building friction into the system,” says Kevin Eastman, a professor of insurance and risk management at Georgia Southern University, who reviews filings and other public submissions in the course of his academic research.
“If someone has decided it should be public, it seems to me, why not make it more easily available?” Eastman says. “The question is: Should this stuff be there in the first place? That’s an issue for legislators and regulators.
“If it’s required to be submitted, it should be available without a lot of effort.”
The SERFF statement asserts that a new “confidentiality request” added to the system will make it easier for filers to make successful requests that certain filed information remain confidential “trade secrets.”
“If each state builds its own stand-alone public access solution, [the] industry has less certainty that these systematic protections are in place,” the statement reads.
Ultimately, a resolution of the questions arising from electronic access to filings may turn on a common understanding of what properly constitutes a “trade secret.”
Many of the recent rating innovations employing “predictive analytics” are being kept confidential as trade secrets, says Larsen, but expect that to be challenged.
“The innovations that come closest [to being legitimate trade secrets] are some of the sophisticated models, as long as you limit [the protection] to the internal functioning and not the assumptions that go into the model,” says Robert Hunter, director of insurance for the Consumer Federation of America.
“It should be the math of it, not the assumptions.”
Hunter, a frequent critic of insurance company practices, argues that competition would be enhanced by easy access to filing information. He dismisses the argument that open access would discourage companies from investing in product development.
“You’ll still have an advantage, because you’ll already have [the products] in place,” he says.
