Rebating — The Future

By Alexandra Smith

The insurance industry is rapidly innovating, challenging regulators to accept technological change and to update rebating laws, regulations, and guidance to more fully embrace that innovation for the benefit of consumers and the industry.

Speaking as a part of the “Regulator Panel on Insurtech and Innovation,” in conjunction with the Insurtech on the Silicon Prairie’s Speaker Series, Superintendent Dwyer of Rhode Island said that the intent behind the amendments to Model 880 was to encourage consistent regulatory interpretations in two key areas (value-added products and advertising and marketing) by adding language to the model permitting insurers and producers to do or offer certain things that could benefit consumers. 

The amendments, dated December 4, 2020, drafted by the NAIC Innovation and Technology (EX) Task Force, and adopted by the Executive (EX) Committee at the Fall National Meeting on December 9, 2020, notably includes language under section 4.H(2)(e) that permits insurers or producers to offer or provide “value-added products or services at no or reduced cost when such products or services are not specified in the policy” or contract, if:

(i) The product or service is related to the insurance coverage; and

(ii) It is used primarily to do one or more of the following:

I. Provide loss control;

II. Reduce claims costs;

III. Educate consumers on risk of loss to persons or property;

IV. Monitor, assess, or identify risks and sources of risk, or develop strategies to minimize risk;

V. Improve health;

VI. Improve financial well-being; 

VII. Provide post-loss services;

VIII. Incentivize healthy behaviors to improve health or minimize risk of death or disability of a customer*; or 

IX. Help administer employee or retiree benefit insurance.

*Customer is defined in this subsection as a “policyholder, potential policyholder, certificate holder, potential certificate holder, insured, potential insured or applicant.”

See NAIC Model 880, Section 4.H(2)(e).

This list is expansive and may open the door for life insurers and producers to provide items that have not been included in the policy, such as phone applications or wearable technology, without running afoul of rebating laws. 

I am hopeful that the amended language of Model 880 will provide state regulators with clear, focused, and foundational language that can be used to construct unfair trade practice laws and regulations while providing consumer protection and allowing for, if not embracing, much needed innovation in our industry.