Regulatory Success: How CAPE Helps Clients Navigate a Changing Landscape

CAPE believes that helping clients navigate the rapidly changing regulatory landscape is critical to their long-term success. Since 2019, CAPE’s dedicated regulatory team has worked diligently with clients and state departments of insurance (DOIs) and is proud to announce an exciting new milestone:

CAPE’s Roof Condition Rating (RCR) has now been approved for use over 200 times across nearly 40 states for rating and underwriting.

To mark the occasion, we asked CAPE’s Director of Actuarial and Government Affairs, Christopher Clickner ACAS, MAAA, to provide insight into how CAPE’s regulatory team supports clients through the ever-changing world of rate filings, AI, government policymaking, and more.

---

What is the CAPE regulatory team, and what does it do?

CAPE’s regulatory team handles many different aspects of the regulatory environment from interactions with DOIs to monitoring, internally implementing and communicating on pending artificial intelligence (AI) regulation across state and federal jurisdictions. This team is made up of individuals with significant legal, product, and actuarial experience in the financial and insurance sectors.

At a granular level, the CAPE regulatory team:

• Supports and responds to both CAPE-led and client-led filing objections
• Provides guidance and advice on implementing CAPE data into client-led filings
• Interfaces with and educates DOI personnel on AI feature detection technology and its capabilities for the insurance industry
• Provides input on aerial imagery and AI regulation that is under development 

In support of all these endeavors, some of our regulatory team members are on-site at various events throughout the year, such as the National Association of Insurance Commissioners (NAIC), National Council of Insurance Legislators (NCOIL), and Casualty Actuarial Society (CAS) conferences.

How does CAPE support carrier-led rate filings? 

CAPE support for carrier-led rate filings can include:

• An implementation strategy that aligns with a state’s preferred application of CAPE data 
• Supplementary statistics from our own database in cases where a carrier has little or no available data
• Model checklist responses related to CAPE data 
• Responding to DOI objections and inquiries related to CAPE data 

Sometimes, this support comes in the form of additional written content and written objection responses. Other times, this support may come in the form of direct calls with the individual DOIs, when appropriate. 

CAPE has supported numerous clients across the country with the filing of CAPE data, uniquely positioning CAPE’s regulatory team with a strong depth of knowledge on individual DOI questions surrounding AI and aerial imagery use. This allows us to advise clients on the effective approaches that have received DOI approvals—providing a smoother rate filing process from the start.

Does CAPE file any models directly with departments of insurance?

Yes. Sometimes DOIs request that we file our models directly with the department so they can thoroughly review the model prior to approval. Through this process, carriers can simply reference the approved CAPE filing when they make their own model filings, fast-tracking the carrier’s path to approval. To date, there are only a handful of states that have required this filing path for our models, but CAPE stands ready and willing to file directly whenever it is required.

Outside of rate filings, how else does CAPE support carriers?

CAPE also supports carriers in creating underwriting and coverage strategies using CAPE products based on both market trends and current and pending regulation on aerial imagery and AI in insurance. Where carriers must also file underwriting guidelines, CAPE provides guidance and support during the filing process, including responding to objections where relevant.

Additionally, we heavily monitor pending aerial imagery and AI regulation that may affect our products and share those findings with our clients. We also support discussions on CAPE’s model governance framework for our model, as certain states have recently adopted general model governance requirements.

In what other ways does CAPE interact with regulators at the state level?

Whether through meetings or events like the NAIC conferences, many of our interactions with regulators focus on helping to educate departments on AI and the use of aerial imagery in insurance—a fast-moving and complex topic that has become highly important in many state jurisdictions. Our regulatory team has:

• Presented at NAIC closed-door sessions on important AI model topics 
• Educated regulators at DOIs on the broader capabilities of AI technology and its use case in pricing policies to more appropriately match rate to risk in their states
• Discussed the guidance CAPE provides to carriers related to product understanding and usage in the broader industry 
• Demonstrated the robust model governance controls CAPE has built, as well as the predictiveness of CAPE property insights 

How has CAPE contributed more broadly to policy and educational discussions around AI?

In addition to all the support and education CAPE provides through attending the NAIC, NCOIL, and CAS conferences, CAPE has worked with influential parties and legislatures on policy language around the use of aerial imagery. A member of CAPE’s regulatory team has also been an active member of the CAS’s Machine Learning Task Force, which is currently tasked with building educational material around machine learning in the form of a monograph.

What else does CAPE do to keep clients up-to-date on quickly-moving regulatory matters?

The CAPE regulatory team publishes a monthly newsletter that contains several important regulatory topics. Within each newsletter, we provide:

• Information on the status of CAPE-direct filings
• A state-level map of progress and acceptance of CAPE data across the country through client-led filings and CAPE-direct filings
• CAPE activities and attendance at insurance regulation and state legislative conferences
• Details related to current state-level legislative activity that CAPE is closely monitoring 

CAPE also supports carriers by providing model governance documentation, as needed, related to CAPE models in accordance with NAIC guidance and their model bulletin on this topic that has been adopted by multiple states. 

Lastly, CAPE provides talking points for frontline underwriters, customer service reps, and agents on the use of aerial imagery, best practices that serve both the carrier and the policyholder, and how these insights are helpful in property insurance. We also work with carriers to adapt these talking points to their specific needs and use cases so that their teams feel prepared to talk about AI and aerial imagery if insureds have questions.

---

To learn more about CAPE’s regulatory support, contact us here or reach out to your CAPE representative.

If you are a current client who would like to receive the monthly regulatory newsletter, reach out to your CAPE representative for more information. 

If you are attending the NAIC, NCOIL, or CAS conferences and would like to connect on messaging or regulatory strategy, please reach out to our team.