In today’s episode we focus on insurance regulatory reporting with the American Association of Insurance Services (AAIS). With us we have Joan Zerkovich, Senior Vice President of Operations at AAIS. Prior to the AAIS, Joan worked in information technology, with over twenty years as a CIO specialising in building large infrastructure systems.

Joan will talk to us about openIDL (open Insurance Data Link), the blockchain-based solution aiming to improve data sharing between insurance carriers, the AAIS and US state regulators.

 

Blockchain in two minutes

Blockchain is a technology that provides increased trust and security in data sharing systems. It enables users to upload records, data or transactions to a system, which are stored in a chronological order and cannot be modified or deleted. The records are encrypted and stored in blocks, with copies of those blocks then stored in the same away across the network. The immutability of the records and the secure storage across numerous computers on the network provides a level of trust and security never before seen in data systems.

Smart contracts are blockchain’s other distinguishing feature. A smart contract is essentially software that checks for specified transactions in the network and automatically executes queries without exposing any more underlying data than necessary. Combined with blockchain’s immutability, this ensures the trust of all parties on the system.

 

American Association of Insurance Services (AAIS)

The AAIS is the only non-profit, member-owned advisory organisation in the US. As the US insurance industry is regulated on a state (instead of federal) level, the AAIS was formed to provide a common platform across all the state-regulated markets. Joan is here to guide us through the US regulatory framework and how the AAIS helps insurance carriers navigate it.

To begin with, insurance carriers need to request state insurance departments permission to create and rate a new product. After a long approval process, the insurer needs to report to the department once they start writing business. This can be a very time-consuming and expensive process and it can delay a product getting to market by numerous years.

The AAIS employs a countrywide programme to make this simpler across all fifty states. This includes creating common forms and contracts, whose language is set primarily on a national level but is adapted to conform to state-level regulations. Once the programme is approved by the regulator, any member of the AAIS can go through it to write business much quicker, significantly reducing the time and cost involved.

Another feature of the US insurance regulation is that antitrust laws do not allow insurance companies to share pricing and rating data between them. However, the AAIS, as an advisory organisation, can collect policy and claims data from insurance carriers across all states. It then uses that data to to create new products, update loss cost and rating factors and share them back with insurance carriers.

Finally, insurance carriers have to report to state regulators. This is done by providing the data to the AAIS, which aggregates and anonymises it before passing it on to regulators. Overall, the AAIS makes it easier for state-based regulators to serve their communities while also ensuring consistency across all states and improving operational efficiency.

 

Data collection before openIDL

While data collection, reporting and filing of new products is now digital, data is nevertheless coming from multiple different systems across thousands of insurance carriers. AAIS has to normalise the data,