NAIC’s Godfread on Bridging Insurance Protection Gaps and the Role of AI
In a recent interview with Frank Tomasello of The Institutes Griffith Insurance Education Foundation, Jon Godfread, Insurance Commissioner of North Dakota and President of the National Association of Insurance Commissioners (NAIC), discussed the challenges of insurance regulation, the potential of artificial intelligence (AI) in the insurance industry, and the importance of bridging insurance protection gaps. A summary of that conversation is below.
For further insight, click here to view the full conversation, originally part of the Insurance Insights series.
Meeting Challenges Head-On
Godfread highlighted the significant challenges faced by insurance regulators in 2024, including inflationary pressures and severe weather events. These factors have led to affordability issues in the insurance space and a rising rate environment. He emphasized the importance of data collection to understand market trends and the need for state-based regulation to ensure the solvency of the industry.
Working Together
Addressing the role of the NAIC, Godfread explained that the organization provides a platform for commissioners from 56 jurisdictions to collaborate and learn from each other's markets.
"State-based insurance regulation is fundamental to what we do," he said of the NAIC's role. "Having the opportunity to come together as commissioners helps us not only with market-based regulation but also allows us to understand what's happening in each other's markets. We can learn from each other and learn from each other's mistakes to improve our operations."
Looking Ahead
Godfread indicated that the NAIC will continue its work on data collection to inform public policy decisions. He also mentioned the importance of learning from successful programs in other states, such as Alabama's Strengthen Alabama Homes program, to provide resiliency opportunities tailored to each region's needs.
Godfread also touched on the issue of insurance protection gaps and the need for new capital to close these gaps. He stressed the need for a collective regulatory body to understand and address this issue.
"It's really hard to close protection gaps without capital. So, we need to look at our capital structure and examine the capital that's coming into the market and how the industry is responding," he said. "We need to adapt in a reasonable and responsible way to allow that capital in the market to offer more ability to close those gaps."
Artificial Intelligence
On the topic of AI, Godfread expressed optimism, stating that AI holds great promise for the insurance industry. He believes that AI can speed up claims payments and decision-making, enhance the consumer experience, and lead to more tailored policies. However, he also acknowledged the need for caution to avoid underwriting bias and other issues that can arise from the use of automated tools.
"We're concerned about the underwriting bias and issues that can come from the use of automated tools. But I would argue that the ultimate goal of using artificial intelligence and machine learning is to ultimately remove that bias," he said. "Every human has a bias, their own lens they're looking through - even the people making the AI algorithms."
Godfread concluded by emphasizing the need for adaptation. He also acknowledged the importance of addressing underlying concerns of privacy, consumer data, and consumer trust as AI continues to be integrated into the industry.
Jon Godfread was elected North Dakota’s 22nd Insurance Commissioner in 2016 and re-elected in 2020. Godfread also serves as the President of the National Association of Insurance Commissioners (NAIC). Prior to serving as Commissioner, Godfread was most recently Vice President of Governmental Affairs for the Greater North Dakota Chamber in Bismarck.
Frank Paul Tomasello, J.D., is Executive Director of The Institutes Griffith Insurance Education Foundation. He oversees the work of this affiliate of The Institutes and is responsible for advancing strategic plans, serving as a liaison to the Board of Directors and Advisory Council, and interacting with both internal and external stakeholders to further The Institutes Griffith Foundation’s mission. Tomasello was educated at Duquesne University School of Law. He practiced law in his native Pittsburgh before transitioning to a career in the non-profit realm.