Salt Lake City
Three insurance commissioners comprised a panel here that surveyed some of the most high-profile regulatory issues currently before the National Association of Insurance Commissioners.
Speaking here at the spring conference of the National Alliance of Life Companies, Utah Commissioner Merwin Stewart shared his views on suitability; South Carolina Commissioner Ernst Csiszar discussed the small face amount issue; and Arkansas Commissioner Mike Pickens gave a status report on the progress the NAIC has made in the last year toward implementing its statement of intent.
Stewart gave a reflective, rather than a nuts-and-bolts regulatory, talk about suitability. “We cannot create enough rules to prevent policies being presented in a wrong manner,” he said. “So the way to handle suitability is to base it on principle.”
When asked to elaborate on what that principle was, Stewart said it is “for the seller to get the buyer to understand; to first find out what the need is and whether it is of value to the customer.”
He continued, “We need to get to the point where we can do the job without all the intricate rules because there will always be something for which there’s no rule.”
Stewart said he understands that companies need to make “a reasonable profit,” but that this should be in the context of “striving to give more value to customers at a reasonable price.”
Companies and agents, he said, need “to follow the golden rule; in other words, if you were on the other end, how would you like it to be?”
Csiszar, throwing down the gauntlet to his host association, said he was “unhappy with the small face amount issue,” and that one reason for that is “the approach the NALC is taking on it.”
He likened the approach of the NALC–which mainly represents smaller life companies–to the approach “a husband and wife would take when they suspect each other of adultery–it’s based on suspicion and mistrust.”
Regarding the issue, he said there is a perception among insurance department bureaucracies that “companies are screwing the customers.” The fact is, he said, that he and the public don’t understand the products selling in this segment of the market.
Csiszar said his intent has been to try to build a body of knowledge in order to understand what is going on in this part of the industry. He said companies have to be able to get concepts across to customers without using actuarial language. “We have to challenge ourselves to get it across to the public,” he said.
From a practical standpoint, he continued, the tack the NAIC has taken is disclosure. He said he feels that customers have to accept some responsibility in a transaction, and that his job is to make sure consumers have the information they need to make an informed decision. Even so, he added, “We can’t prevent some people from making poor decisions.”
Pickens, who is also secretary-treasurer of the NAIC, said the organization “has made remarkable progress since it issued its statement of intent a year ago.”
He said there is “a new breed of commissioners that is not afraid of the politics of regulation,” such as testifying before Congress. In fact, he said, the NAIC was “not going to wait until the last minute [to deal with Congress] on a federal charter as it did on H.R. 10.”
Going over what the NAIC has done in the last year, Pickens said the progress on responding to the National Association of Registered Agents and Brokers requirement in Gramm-Leach-Bliley was “unprecedented in terms of action by NAIC member states.”
As of May 24, he said 25 states were GLB-compliant regarding NARAB; that bills were pending in 17 states; and that legislative action is expected in 42 states in 2001.
Regarding financial privacy protections, Pickens said 36 states are reporting they will enact such protections based on GLB/NAIC model regulation. “The problem with privacy,” he said, “is what the feds are going to do.”
Turning to another area, Pickens said the NAIC had undertaken a limited launch in 10 states of a single-point filing speed-to-market initiative and that 5-10 more states and more products will be added this year.
Regarding national treatment of companies, Pickens said, “We need to make it easier for strong, stable, smaller companies to do business across state lines.” The national treatment standard, he said, “has to encompass these companies, not just the larger companies as has been the case up to now.”
Reproduced from National Underwriter Life & Health/Financial Services Edition, June 4, 2001. Copyright 2001 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.