I’m at the AAIS Main Event this week and I’ve learned a lot. I go to a lot of different events for a lot of different reasons. I go to this event in part to network and meet people that the Academy can help, and in part to learn about what some people in the insurance world are working on that I might not be fully up to date on.
Oh yes. It’s a learning event for me. Keep learning isn’t just a slogan I use. I mean it. Everyone must continually and intentionally keep learning.
This year’s event really opened my eyes to three topics in particular: the cannabis business around the US, insights into the minds of some key regulators, and the use of blockchain for insurance carriers. Let me hit a few of the highlights for you.
Cannabis is growing around the country.
The cannabis business truly is taking off. 48 of 50 states have taken some action toward legalizing the use of cannabis and cannabis derivatives. That includes everything from full legalization to simple decriminalization.
Let’s define a few terms. By full legalization, we mean that cannabis products in some form or another are available based on medical necessity and that they are available for recreational use by adults. By decriminalization, we mean that in some states, the state has made the decision not to prosecute individuals for the possession or use of cannabis products in certain circumstances.
Cannabis, cannabis derivatives, and cannabis products all refer to items that include one or more of the active chemical components found in cannabis. You already know what products those are. You don’t need me to explain any further.
The growth of the industry is not surprising considering the trend toward legalization around the country. What is surprising is that even in places where it is legal in one form or another, the industry struggles finding insurance coverage. It was even more surprising to learn this from the organization that created the first standard market business owner’s policy designed for use specifically for the cannabis industry in California. There is a strong excess and surplus market for this coverage, but it has yet to take off in the standard market.
I attribute the reluctance of standard market carriers to the fact that there is a tension still to be resolved between the federal government (which still considers cannabis as a schedule one controlled substance) and the several states. In my opinion, no large carrier will file or use any forms or programs designed for cannabis businesses until this tension is handled.
NOTE: Please don’t read anything above as my approval of this particular business. And don’t read this disclaimer as my rejection of this type of business. I’m simply telling you about something that you need to be watching because if it isn’t a business that’s looking for coverage in your area, wait. It will be.
Some regulators are on board with shorter, easier to read, policies.
A few weeks ago, we all read the news that Berkshire Hathaway has created their new type of business owner’s policy. You probably also remember that our friends at Lemonade announced last year that they were interested in making policy language simpler using their Policy 2.0.
If you’re like me, you wondered what was going on in the minds at Berkshire. Certainly, that company wouldn’t think that this would work out. It turns out that this kind of new policy has some regulatory approval and even backing by some regulators. I found out that Berkshire’s product has been approved in several states already.
It turns out that some regulators want simpler policy language for the customers so much that they are willing to let a company (like Berkshire) experiment. They feel like there will be challenges to the policy language, but that it should only need a few tweaks to be solid policy.
As with any cutting-edge product, the proof will be in the profitability. Will consumers trust that it protects them? Will agents trust that they won’t have any issues if they sell it? Will this be what consumers really want in the future? Or is it something that will fizzle out because of poor uptake, poor results, or poor showing in the courts.
I will remind you that none of us wanted music, games, social media on our phones until someone gave them to us.
Blockchain will help in reporting while preserving confidentiality.
This was probably the most mind-blowing part of the day to me. I admit that I have a basic understanding of what blockchain is, how it started, and what the dominant use of blockchain is so far.
Blockchain is a shared ledger technology that allows authorized users to post a block to the chain and those blocks can never be deleted or changed. In the words of one of the speakers today, blockchain (in three words) is: distributed, immutable ledger.
All clear now? Maybe this will help. All of the users in the blockchain have copies of the same transaction history. Whenever one member adds a transaction, that is added to everyone’s copy of the history. Once a transaction is posted to the chain, it cannot be deleted. It also cannot be changed, unless everyone in the blockchain agrees to it.
Today, we were talking about the use of blockchain as a tool to aid in helping regulators when they make a data call. In short, an advisory organization (AAIS), any member insurance company, and the regulator all become members of the blockchain. The regulator puts out a data call, for example, the Florida Office of Insurance Regulation could send out a call for data related to all losses due to Hurricane Michael. That request for data goes to the advisory organization and the requested data is released to the OIR, while maintaining all company privacy.
The way I understand it, it would make the data call process faster, easier, and more secure for everyone.
I can’t pretend to be expert in all of the things that I am learning. I can tell you that I’ll chew on more stuff as the days go by and will probably reach out to a few contacts with more questions. I like finding out what I don’t know. It helps me to know what to learn next.
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