Policymaker Perspectives

Peter Miller [00:00:03] Hi, I'm Peter Miller, president and CEO of The Institutes. We're a global not for profit whose mission is to educate, elevate and connect the people focused on risk management and insurance. You're listening to Predict and Prevent, a podcast that explores how technology and resiliency can prevent losses before they occur. In each episode, we learn about innovative solutions and hear from leading experts on how they are making these approaches a reality today. Insurance regulators and legislators play an important role in the insurance ecosystem and the efforts to predict and prevent loss. The institute's Griffith Insurance Education Foundation serves public policy makers by providing non-partisan and non-advocative resources and programs designed to provide a greater understanding of insurance and risk management. With that in mind, I invited Frank Tomasello, executive director of the Griffith Foundation, to host today's conversation and a discussion with regulatory leaders. I know you'll be in great hands with Frank. So sit back, relax, and enjoy the conversation. 

 

Frank  Tomasello [00:01:25] I'm Frank Tomasello. So thanks for the warm welcome, Pete. And thank you all for listening. During this podcast segment, I'll visit with insurance regulators to explore their views on opportunities to leverage innovation to better predict and prevent loss. We'll also discuss efforts underway by regulators to foster innovative practices in their respective states, while ensuring that guide rails afford sufficient consumer protection and foster fair and healthy insurance markets. I hope you learn something new today about the regulatory framework in risk management and insurance and its important role in the insurance ecosystem. For the first segment of this podcast, I sat down with Rhode Island Superintendent of Insurance Elizabeth Dwyer. Miss Dwyer was appointed superintendent in 2016, having previously worked for the Rhode Island Department of Business Regulation for some 16 years. Prior to that, she worked in private law practice. Ms. Dwyer is a member of the National Association of Insurance Commissioners, often referred to as the NAIC and has served as chair and vice chair of various committees, task forces and working groups. Without further ado, here's our discussion. Superintendent Dwyer, thanks for joining us. The institute and others are saying that our current risk landscape requires more of an emphasis on predicting and preventing losses as a way to complement traditional risk transfer. Beth, I'm wondering how you would frame the existential challenges society now faces because of an increase in frequency and severity of risk and in some cases uninsurable risk as well? 

 

Elizabeth Dwyer [00:03:06] Yeah, I think it really needs to be something that involves everyone, not just risk transfer to insurance companies. So we're seeing insurance companies pulling back, for instance, on residential properties, maybe putting in a hurricane deductible that we hope consumers understand but are afraid they may not. But there are things that businesses and homeowners can do to mitigate that risk that will not only financially protect them, but protect them from other adverse consequences of the risks that we're seeing. I also think it's very interesting for us to be looking at the coverage gaps and how we can address that. So going back to my earlier statement of hurricane deductibles, if we could get a parametric product that just covers $5,000 or $10,000, which is the amount of the deductible that would [00:03:58]marry [0.0s] with a traditional homeowner's policy, where further spreading the risk among more than one carrier and the the consumer of the insurance would be more whole. So those are interesting things to think about and hopefully put together. But we also have to keep in mind that simple risk mitigation actions taken to structures, you know, to make them more resilient, to risk is extremely important as well. 

 

Frank  Tomasello [00:04:26] A number of observers suggest that the depth, the breadth, the pace of innovation in insurance is quickening. I'm curious from your purchase, a regulator, what are you seeing there and what does it mean for those who are looking for opportunities to better predict, to better prevent, to better mitigate risk? 

 

Elizabeth Dwyer [00:04:45] I think there's some great stuff being done all sorts of places, academia, companies coming up with products that address risk. And it is going fast and furious. It's very difficult for anyone to keep total track of all the different people that are innovating. And that will ultimately come together to address all of these risks. It's hard enough that by the time something really comes to market, the regulators reacting to it and, you know, reacting to something, sure, that's great, but the next new thing is coming out. Right. So one of the ways that we have been addressing this in the public policy realm is by requiring good corporate governance. So insurers that are utilizing some of these new and innovative concepts really need to understand what are the rules of the road, what is it that the regulator and consumers will not like, and not just throwing up or putting something in, but really understanding what that new technology or new innovation is going to do and really looking at themselves internally to make sure that they feel that they're, you know, covering all the bases and meeting all the regulations. So it's corporate governance. I think you're going to see more and more regulations, a statute  requiring corporate governance as opposed to addressing any individual technology. 

 

Frank  Tomasello [00:06:11] With respect to corporate governance, do you see guide rails essentially emanating from the new (H) Committee at the NAIC? Is that in large part why the (H) Committee was formed to address this notion of significant increase in innovation? 

 

Elizabeth Dwyer [00:06:27] Going back about I think it was like 2015, the NAIC established the big data working group which still exists seem which I'm chair of this year. We, then went from that working group to a task force, the Innovation Technology Task Force, and just last year to a letter committee. So what that shows you is the increasing importance of these innovate in the innovation in insurance regulation. When you talk about the (H) Committee, we refer to our letter committees. Those are, you know, life, health, property and casualty. The big subject matters by making innovation a letter committee, it shows how important regulators feel innovation is in this field. 

 

Frank  Tomasello [00:07:13] What are shift gears a little bit and ask you a bit about the promise of AI and predictive modeling as tools to better predict and prevent risk. They are top of mind for many. What are some of the challenges of leveraging those technologies, given our regulatory framework here in the United States, our policymakers working through some of those challenges? 

 

Elizabeth Dwyer [00:07:32] So I think one of the biggest challenges that we initially saw when we started seeing innovative things was our rebating laws. So a number of us were interpreting those laws which were really put in place so that people didn't buy insurance policies. So way back at the turn of the century, you know, people would say, "Hey, you take out this life insurance policy, I'll give you $100". Right? So the risk wouldn't be what the insurer expected and you had unpredictable losses. That's what they originally started as. And sometimes they were being interpreted to prevent very innovative ideas that could assist both insurers and consumers. I'll use a simple example of water detectors. So an insurer, a homeowner's insurer or a business property insurer might want to give a discounted and or free water detector that would assist both the homeowner who would know when a flood is happening and the insurer who would have to pay for the financial effects of that flood if it went on. And there were a couple of states that felt that that violated the rebating was, well, you know, I don't see how that harms anyone. I see how it helps everyone. And as a result, the NAIC really went in and did a deep dive on the model laws on rebating and really set out that that type of thing related to the risk that is beneficial for the risk is not rebate. 

 

Frank  Tomasello [00:08:58] You talked a bit earlier about the ecosystem coming together to address the challenges before us. How does your department or perhaps the NAIC writ large, think about working more closely with insurer tax, with insurers to help bring about constructive change focused on predicting and preventing loss, while at the same time ensuring that the risks of that experimentation, that innovation are not transferred to consumers. No doubt a delicate balance. Appreciate your insight on that. 

 

Elizabeth Dwyer [00:09:27] Yeah, we really have not had an issue here with any insurer that has had an innovative idea that we weren't able to work with them and really get them to be able to do that without violating our laws. Like, there's a lot of discussion about regulatory sandboxes, the idea being that we would waiving law regulation. I would rather know what the lower regulation is that's preventing it so that I could attempt possibly move on that law of regulation if it's something that really shouldn't be in place or should be, you know, amended to make it clear. We haven't had any problem at all. We've had a number of people come here. We have one national carrier that started their insurer tech program in Rhode Island only as a test product. We really have not had to turn anyone away with what we consider to be an innovative and good idea for consumers. But, you know, every idea is different. So I guess it depends with the next thing through the door is. But we've really always at this point been able to work with carriers to allow them to do these innovation programs that are beneficial probably to their bottom line, but also to consumers. 

 

Frank  Tomasello [00:10:41] Enabling legislation obviously varies by state. So is your sense that your experience is a typical across the United States? Is that a fair statement or do you think there are some jurisdictions? 

 

Elizabeth Dwyer [00:10:54] I think it is. You know, in talking to fellow regulators, I most of these programs that are obviously beneficial. So I'll go back to the water detectors. I don't know anyone that would say, "Hey, it's a bad idea to know about a flood early on". Right. Usually most people can these these things can be worked. I hear a lot about, you know, barriers to innovation, but I don't get a lot of examples. I get a lot of people saying, "Hey, there's barriers when I say, what are they?" I don't really get a specific example that would stop. So I you know, I guess it depends on maybe there are proposals out there that I might not think were good for consumers. So maybe there are barriers to things like that. But I haven't been able I haven't had one case where an insurer came with something innovative that we haven't been able to allow it, maybe with a few small changes to the program. 

 

Frank  Tomasello [00:11:51] I'm curious, are insurers in greater volume bringing ideas to regulators regarding new tools that may help to better predict and prevent losses? What is your sense there across the country  or we seeing a greater volume of ideas emanating from insurers? And could you paint a picture of that for us? 

 

Elizabeth Dwyer [00:12:11] Yeah, absolutely. I mean, every insurer I know, certainly all the domestics I have some group within the insurance ecosystem that is looking at things like this. I am sure they don't bring every idea to me, right. I'm sure they will, you know, tested in walk through. But if you're not doing that, I think you're going to be left behind. I think they're the stagnant issuing standard policies, you know, collecting premium. But at some point when other people are going out and really addressing mitigating risk and other technologies, I think insurers are going to be left behind if they're not looking at this. But yeah, there's constantly our people are coming to us with new ideas, always fascinating, just like, wow, they can do that. That sounds great. 

 

Frank  Tomasello [00:12:58] I'm curious to get your reaction to the notion of CAT modeling. What do you foresee there in terms of the promise of better predicting and if not preventing, perhaps taking steps to mitigate losses through advanced CAT modeling? 

 

Elizabeth Dwyer [00:13:12] I love the second part at the predicting sometimes can adversely affect my market. Certainly, you know, when reinsurance becomes more expensive because of the CAT models. I would love something to see something that the CAT modeling is predicting and preventing. So ways to, you know, determine where storms are going to land and how we can mitigate harm to the customers. But I think, again, it's an area that's been around for 15 years, but every year is getting more and more and more sophisticated and holds great promise in the future for what maybe we can do to address some of our increasing climate issues. 

 

Frank  Tomasello [00:13:54] Very broadly speaking, are public policymakers adjusting risk based capital or solvency requirements in light of loss severity trends that we're seeing from natural disasters. What does that landscape look like? 

 

Elizabeth Dwyer [00:14:07] So they are already looking at that type of issue, depending upon your company. You know, RBC is kind of developed to take those any risk. So it doesn't matter what the risk is. Our examination process in our financial analysis is designed to identify and address risks. So this would be an increasing risk. I don't think we're you know, there are certainly RBC charges that we're looking at. Is that charge high enough? Do we need to rectify it? There's a million working groups. I shouldn't say a million, but there's a lot of working groups under the Financial Condition Committee and they're constantly looking at variables in RBC, depending on what line you're talking about. So it's definitely something we're looking at. It's not a this is what's going to happen now. It's a constant process. 

 

Frank  Tomasello [00:14:58] Thank you. And if I may, for those unfamiliar with risk based capital, could we impose upon you for maybe just a top level overview for the uninitiated? 

 

Elizabeth Dwyer [00:15:07] Okay. So I am a lawyer, not a financial person. So any financial person who's listening don't criticize my language. But in essence, risk based capital is a formal way of assessing how much capital a particular insurer has for the risks that that insurer is facing. So it's not, you know, blank amount of money per insurance company. It's an evaluation of what is the risk, what is the potential loss and how much capital do you need to back that up? 

 

Frank  Tomasello [00:15:36] Thank you. Very well stated. Let's talk a little bit about this notion of whether regulators are being asked to consider reforms in support of greater risk mitigation. Curious to get your insight there. Are those requests that are percolating? Are they emanating from insurers? Are they coming from state lawmakers, if at all? Can you give us some insight there? 

 

Elizabeth Dwyer [00:15:57] Sure. You know, we we have not we've been blessed not to be hit by a lot of storms recently. If you go back 15 years or so after Andrew in Florida, and of course, I'm sitting right on the Atlantic Ocean, so there was definitely a risk here. We had a lot of push from lawmakers who trying to push insurers to insure certain properties and if they required mitigation efforts, offer some sort of premium discount. My understanding is that is happening in California right now, too. I'm not close enough to that discussion to know exactly what's going on. But, you know, the idea that insurers can be part of the solution is it's not an easy problem, but it it definitely is, you know, one one thing we should consider. So, you know, you tell people you should build to the building code. You should do this. You should do that. But, you know, if there's a tangible effect of that and that might be your insurance premium that might motivate more people to do mitigation pre-disaster. Right. 

 

Frank  Tomasello [00:17:08] Given the severe risk landscape, as we look at opportunities to leverage innovation to better predict and prevent loss, from your perspective, is this a glass half empty or a glass half full scenario? 

 

Elizabeth Dwyer [00:17:20] Well, I always look at things as glass half full, so that might be my Pollyanna attitude. But I think that, you know, you hear a lot about climate change and the effects that we're going to see in the next couple of decades. The innovation side can mitigate that, right? I think it really is a very positive thing. There are concepts that you and I cannot conceive of right now that will be realities in ten years. And my hope is that those realities help help the insurance landscape to moderate any swings that would be, you know, detrimental to the market and to consumers. 

 

Frank  Tomasello [00:18:01] It was a delight to sit down with Superintendent Dwyer and to hear her expert insights into the current regulatory framework. I had the great pleasure of visiting with another noted public servant, Connecticut Insurance Commissioner Andrew Mais, appointed in 2019. Mr. Mais previously served as a member of Deloitte's Center for Financial Services and before that was a director at the New York State Insurance Department. He's president elect of the NAIC and currently serves on the International Relations, Property and Casualty and Financial Regulation Standards Committees. Commissioner Mais, we asked a similar question of Superintendent Dwyer, and I'd appreciate your thoughts on how you might frame these existential challenges that society faces today because of more frequent, more severe and in some cases uninsurable risks. 

 

Andrew Mais [00:18:56] I do think that we have significant challenges, and that's all across the board. But easiest one that we see in front of us or the easiest to understand perhaps would be the risk associated with climate change. And we know, you know, you always see that that disclaimer when you look at commercials for investment banks or that past performance doesn't guarantee future results. We're seeing the same thing happening. We're seeing changes that we need as regulators, as insurers to be able to address this as we move forward. That's not the only place that we see these increasing risk. We've seen a huge transformation and society that's technology based over the past couple of two or three decades. We now see and we certainly have seen over the past decade or so, everything from ransomware attacks to nation state actors intruding. We're not entirely sure how many of these risks are insurable or completely insurable. We're not entirely sure what we would do as a society, certainly as we saw in COVID, when you've got these big challenges that are suddenly dropped on us. But I will say that I certainly think our insurance markets and or regulators have understood the challenges. We're having the right discussion. We know it's going to take a kitchen sink approach and we are moving forward with that. And prevention is as important as anything else. You look at property casualty insurer. You know, if you've got a house and you've added a certainly on the area where I live, where it's pretty cold, you add something to monitor, make sure your pipes aren't freezing, you were going to get a reduction in your insurance policies. Similarly, with coastal storms and all that, you know, there are things you can do and there are ways to incentivize risk mitigation procedures that both insurers and that the regulators are working on and need to continue to work on. You know, the industry is going to continue to improve its modeling capabilities as we go forward. And yes, again, it's a challenging set of circumstances, but it's an important set of circumstances that we're faced with. And whether it's, you know, two factor authentication for your computer system to keep out cyber thieves or if it's making sure that your house is up to standards. The industry has been at the forefront in encouraging consumers of all sorts to mitigate to to participate in acts of mitigation, because that is so much less expensive than trying to fix it after a disaster happens. 

 

Frank  Tomasello [00:21:56] Commissioner, to build upon what you shared. I'm curious, how do you see the insurance ecosystem? And when I use that term, I'm talking about public policymakers from both the legislative and regulatory communities, about insurers and sure edge and academics as well. How do you see them coming together to pursue solutions aimed at better predicting and preventing losses? 

 

Andrew Mais [00:22:18] I think that's a good question Frank, that reflects the changes certainly that I've seen in regulation. I know there was once a time when regulation may have been looked at as an us versus them and certainly as regulators, we will always enforce a rules to protect consumers. But I do think most regulators would agree that this all best insurance ecosystem functions better when we're all growing together. I mean, its a you look at that NAIC, the National Association of Insurance Commissioners, and you can see collaboration being front and center. There are both among the states and we bring in we're probably one of the most open regulate regulators regulatory systems. You're going to find we bring in regulators, we bring in industry, we bring in consumer representatives, because we know there's got to be a candid there's got to be an open dialog. There has to be a willingness to listen. There has to be a common understanding of the goals that I think we all share. I think we all want safe, stable insurance markets. And, you know, insurance is a business I trust. I say that all the time. And consumers have to be able to trust the companies. And that means they have to be able to trust us as regulators. We want to make sure the claims are paid. We want to make sure that the markets work for consumers and that the markets are available to consumers. So again, it's one goal and it's you know, it's not like the insurance companies don't want to sell products and it's not like we don't want them to sell product. So what we have to do is work together, stay on track. It's easier said than done in some ways, but we have that collaboration is important in order to get to the consumers that we are first and foremost charged with serving, we have to get them the products that they need. And working together is a way for us to do that. 

 

Frank  Tomasello [00:24:21] With respect to working together, there are a number of observers who suggest that the depth, the breadth, the pace of innovation in insurance is quickening. What are you seeing there and what does that mean with respect to opportunities to better foresee, forestall, to better mitigate risk? You spoke a bit about that a little bit earlier, but if we could drill down a bit, we'd appreciate your insight. 

 

Andrew Mais [00:24:43] Innovation is, to me, a necessity. The industry cannot prosper unless it innovates and that if you think, as I do, that having a prosperous industry is good for consumers, then consumers will prosper when the industry innovates. We know that there are concerns with insurance. We know not everybody has the insurance that they need. But let's just take the technology driven innovation that we've seen that that innovation has helped to reduce some of the pain points. That's helped to reduce some of the friction on the system. It's helped the industry to be able to offer more products and more relevant products to consumers. You know, as regulators, of course, we're going to be concerned with innovation. We have to make sure that consumers are protected as we move forward. And we also know and certainly I feel that there were going to be failures. The ability, the willingness to accept that there will be failures as a necessary precondition to allow for innovation. And as regulators, it does not thrill us. And that's part of what why the NAIC formed. Its first letter committee and 20 something years, the (H) Committee which covers innovation, cybersecurity and technology. It's a way for us to get together, to monitor, to promote innovation, and to make sure that we as regulators are informed. We're having the right discussions. We are not standing in the way of innovation that will benefit consumers. 

 

Frank  Tomasello [00:26:24] Commissioner Mais, artificial intelligence tools are top of mind for many these days. With respect to the promise of AI and the potential application for a better prediction and prevention of risk, what do you see as some of the opportunities and challenges of this technology? 

 

Andrew Mais [00:26:42] There are significant challenges in there, I think, even greater opportunities. You know, you've got to look you have to look on it from both sides. On the one side, the technological advances and we've seen this and you know, about the Microsoft, ChatGPT enabled system. We've seen that it can, if it's not monitored and regulated properly. And I say Microsoft only because that's one of the newest. This is not just Microsoft, but we've seen that there was a potential to propagate the biases of the past if we do it that way. We've also seen, on the other hand, that technology that AI that some of the new models that we've seen can enable reductions and those biases can expand. Now, the pool of products available can expand the target markets for these products. So that's what we want innovation to do. We want as regulators to be able to, I'm not necessarily sure keep pace is the right word because you're always half a step behind innovation by definition. But we have to be close enough. We have to make sure that innovation is proceeding in the right direction. I mean, it's a collective effort. We have to track it. We have to manage it. And again, to go back to the (H) Committee. That the creation of the (H) Committee, we have to understand it. There is no point in us sitting here and closing our eyes and saying, this is an industry that survived all of these years doing things one way because we can't keep doing things the way we've been doing. You know, we need to change. We need to innovate. Technology, AI, modeling, you know, there is so much that we can use that to do. And yes, we are going to you know, certainly what I start with a special committee on race on insurance. One of the things that you will see, one of the things that we're doing in Connecticut, we're making sure that the biases of the past and as much as possible do not are not a part of the new systems that we use. That means looking at the inputs. That means making sure the data is clear and fair. And that means and I think it will mean as we go ahead, as we go forward, looking at the output, making sure that nobody is being disadvantage. My friend Eric Dinalo would always say insurance is the engine of capitalism and there is a reason for that. It is how we manage both individual and societal risk and AI the opportunities that are available there, with AI, with machine learning, with all the various other subsets that will enable us to manage risk better. It will enable us to probably, I would hope, foresee risk better. We can pick out whatever, as you know, a couple of standard deviations down the road. We can mitigate that risk. But for the individual consumers, and this is where AI I think is very important, it means that you can get a product that's better suited to you, that's as relevant as possible while still benefiting from the broad the idea that insurance is about spreading the risk for everyone. It means everyone. And this is one of those things that certainly as a regulator, just as a person, I believe we need to make sure that everyone has the insurance they need. AI, the progress we've seen through technologically driven innovation will help us get to that place. 

 

Frank  Tomasello [00:30:38] How does the regulatory community work with insuretechs, with insurers who come to you perhaps with ideas, new innovative ideas and approaches? How do you engage with them, work with them while at the same time ensuring that the risks of experimentation are not transferred to consumers? 

 

Andrew Mais [00:30:57] An easy answer to that is that the insurance landscape is really rapidly changing, and so we can't sit back and do nothing. For us engaging with our insurers, engaging with insuretech, engaging with those who may just be on the outside looking to get into this industry is a primary importance. We believe certainly and I speak here for Connecticut, but I do think that this is a widespread belief among regulators that if we are going to be the ones with responsibility for the data, whether what the responsibility for how that data is used, with responsibility, you know, to go back to the to the basic charge with responsibility for protecting consumers. Part of that part of what we have to do is to educate consumers. Another part of what we have to do is to educate those, especially those industries in general knows how highly regulated they are. But those coming from outside the Silicon Valley, people who are used to failing fast may not necessarily understand that. That means that we have to be open because we have to let them understand that while we are going to make sure they don't harm consumers, this is not going to be something that's burdensome. It's not meant to stifle the growth of innovation. It's not meant to cut back on the use of big data or AI. We are going to collaborate with you. We are going to work with you because we know all this is going to help the various practices. We know this is going to help you reduce costs. And we know that a competitive market is the best protection that our consumers can get. 

 

Frank  Tomasello [00:32:55] With respect to change. Broadly speaking, are you seeing public policy makers adjusting risk based capital or solvency requirements in light of loss severity trends from natural disasters? What's your sense there? 

 

Andrew Mais [00:33:08] The quick answer to that is yes. As we looked, when you look at the NAIC and what's been happening in terms of RBC and [00:33:15]enter, adding [0.0s] wildfire risk, looking at other new risk. And, you know, certainly as you look at just the basic NatCap risk that we've been looking at, hurricanes, floods, for instance. You can see that at the NAIC we formed a special center of excellence to look CAT modeling, so we can be sure we're getting the correct information, so we can be sure that we understand that information and so that the insurance companies, insurance products are properly burdened because when somebody has their house hit by a hurricane or by a forest fire, they need to know that they're going to get paid. That's the bottom line in that sense. Not much has changed in terms of the goal, but the process has certainly changed and response to the new risk and the ever increasing risks that we face in today's society. 

 

Frank  Tomasello [00:34:14] Thank you, Commissioner. Broadly speaking, are regulators being asked to consider today reforms in support of greater risk mitigation? Are those requests, for example, coming from insurers or perhaps from state lawmakers? What are you seeing there, if anything? 

 

Andrew Mais [00:34:30] I'm not sure that I would say regulators are being asked, although that's probably true. But I will say the regulators are clearly considering this. I mean, and again, to go back to natural catastrophes, we've seen a number of states that have moved towards, you take a look at Alabama, their initiative. You look at what's happening in California. We've seen significant movement towards risk mitigation. Certainly in Connecticut, that's part of what we are doing because and we've seen the numbers yet 11 bucks that you're going to say if for every dollar that you spend on mitigation. But it's not just be an investment. It's not just a dollar amount. It's also about lives. It's also about community, is that you keep together. And I think we all recognize that we've got that greater responsibility. And yeah, it's a you know, it's a moral responsibility, but we also have an economic responsibility to our communities. Risk mitigation has a central role in this. And I think you will see I don't think there is a regulator around. And frankly, I don't think there is a company around that's going to disagree about it's not trying to do everything it can to mitigate the risk instead of having to deal with damages later. 

 

Frank  Tomasello [00:35:49] So there are other ways you can think of where the insurance regulatory community today might be able to better support efforts to predict and prevent losses to make communities more resilient. You've touched upon many already, but do other notions come to mind? 

 

Andrew Mais [00:36:05] One of my particular concerns right now is the coverage gap, and there are significant. You look at the difference pretty much anywhere. I mean, it may be less in the US than in many other places, but you look at any catastrophe and you look at the difference between the economic damages and the insured damages. And there is many almost every time there is a significant gap. We need to be able to identify those gaps. We need to educate consumers where those gaps exist. You know, if a consumer chooses to take a five percent hurricane deductible instead of a $500 deductible because of the difference in cost, you know, that's a consumer's choice. But we want to make sure that consumers do understand the choices that they're making and the impact of those choices. And it's probably one of the most difficult parts of the job. You know, I look at, just a story that I tell. I live on top of a hill. And there is one of those flood projection 50 year flood projections that I saw that one company did. And there probably is almost no chance, according to this, that I would ever be flooded out. But I have flood insurance. Unfortunately, there are so many people who don't. And that to me is part of the educational process that we need to engage and to continually engage. And we need to work with industry and we need to work with consumers. And certainly as state regulators, we need to work together to look at the data, to identify those gaps and to do whatever we can through education or otherwise, to ensure those gaps are filled as best as possible. 

 

Frank  Tomasello [00:37:55] To wrap up our conversation, I'd like to get your response to a question that I also asked Superintendent Dwyer. As you think about opportunities to leverage innovation to better predict and prevent losses, from your perspective as a regulatory leader, do you view our situation as a glass half empty or a glass half full? 

 

Andrew Mais [00:38:15] I'm an incurable optimist, Frank, and I believe that we are so much better off than we were 20 years ago and that we will be so much better off 20 years from now. And I get that, part of that goes back to the fact that we have all recognized and by all I mean all the participants. In this industry we have recognized that we need to work together because the issues are too big for any single area of as industry to address with the regulators or the insurers, the law makers. We need to be able to take a look at what we're seeing, whether it's climate change, whether it's cyber. There is so much that's happening right now. We need to make sure that five years from now, 10 years from now, 50 years from now, the decisions that we made will help to make sure that there is coverage then, when that coverage is most needed. I don't want to be too egotistic, but yeah, that's kind of what insurance regulators have been doing for a while. You know, when Ben Franklin started up our company in Philly, it wasn't about what had happened. It was about making sure that going forward we were better off, we were protected. And I think that's what we as insurance regulators are still focused on today. 

 

Frank  Tomasello [00:39:42] Commissioner Mais, I thank you for your time today. It's been a fascinating conversation. Much appreciated. 

 

Andrew Mais [00:39:47] Thank you. And again, I really appreciate the work you do. It's a pleasure to be here. 

 

Frank  Tomasello [00:39:54] I extend a heartfelt thanks to Commissioner Mais and Superintendent Dwyer for joining me on this podcast episode. So far, the 2023 risk landscape has been severe and rife with challenges. However, we know the challenges often bring with them golden opportunities. For the insurance ecosystem, the obstacles we now face may also represent a chance to innovate and to usher in positive changes, which some observers suggest are long overdue. Public policymakers, like Commissioner Mais and Superintendent Dwyer play a crucial role in the risk management and insurance ecosystem and in our efforts to better predict and prevent losses. I'm so glad I had a chance to sit down with them both and hear their perspectives on how the landscape is evolving right before our eyes. Thank you for listening. See you next time. 

Peter Miller [00:40:56] Predict and Prevent is a podcast brought to you by The Institute. Subscribe on your preferred listening platform, and join us for future episodes where we continue to dig into this approach and the opportunities it's creating for risk management and insurance.