ACLI Asserts Improving State-Based Regulation Remains Job One

To The Editor:

Never before in the pages of National Underwriter have we seen a piece as ill-informed and irresponsible as your July 2 editorial, “Wink. Wink. ACLI Still Supports State Regulation Of Insurance.” This is particularly surprising, given that coverage of regulatory reform efforts by ACLI and others on National Underwriters news pages has been characteristically thorough, accurate and fair.

To attack a group that has invested so heavily in working candidly and productively with regulators to improve the state system of regulation is unwarranted, irresponsible and destructive to a process that is crucial to us all. To suggest so strongly that ACLIs commitment to and support of state regulation is not genuine is profoundly disingenuous. To suggest that ACLI is preparing to abandon state regulation for a federal option is foolish–and its just plain wrong.

To set the record straight: ACLI continues to have no higher priority than the reform and modernization of the state-based system of insurance regulation. For more than a year, ACLI has been working closely with the NAIC to improve state regulation in three areas that both organizations have identified as priorities for reform: producer licensing, speed-to-market and market conduct. ACLI has presented the NAIC with detailed recommendations for bringing about uniformity and efficiency in each of those areas.

Specifically with respect to speed-to-market, ACLI proposed systemic modifications to the product regulation structure and process in An Optimal Approach to Insurance Product Regulation, a lengthy report submitted to the NAIC in November, 2000. The NAIC incorporated many of our recommendations into what is now known as CARFRA. ACLI actively participated in the drafting of CARFRAs national product standards. And since CARFRAs inception, ACLI–alone among industry trades–has been working actively with the 10 states participating in CARFRA to eliminate as many of the state deviations as possible.

In fact, ACLI has been far more invested in creating and perfecting CARFRA than any other industry group–including the agents groups on which your editorial lavishes great praise. Nevertheless, we are grateful that the agents groups are now echoing ACLIs previously stated observations and analysis of CARFRA and encourage them to make their concerns known to the NAIC. We invite them to join ACLI in devoting a substantial amount of their own time, resources and expertise in helping to ensure CARFRAs success.

We strongly object to your characterization of ACLIs testimony at a speed-to-market hearing before a House Financial Services subcommittee on June 21–a hearing that was not attended by any National Underwriter reporter. Nevertheless, you state that ACLI gave CARFRA “some perfunctory lip service before it launched full-bore into the still-new programs flaws.”

To the contrary, ACLI delivered lengthy testimony explaining the nature and gravity of the speed-to-market dilemma–and only a small portion of it dealt with CARFRA. We commended the NAICs efforts to achieve a single point of filing and uniform standards through CARFRA. We acknowledged that perfecting CARFRA will be a lengthy and difficult process for the states, because state regulators must operate within the constraints of the existing legal structure, where deviations in product content and filing processes exist state by state. We expressed our strong support for CARFRA, called it a good first step toward the realization of a broader solution, and pointed out that we are working closely with the NAIC to ensure CARFRAs success. How could your editorial writer have ignored this? And more troubling, why?

In a few brief sentences, our testimony also reviewed some of the practical problems of implementing CARFRA–the numerous state deviations, the voluntary nature of state participation and the “advisory,” non-binding nature of CARFRAs product approvals. The agents groups echoed these same concerns in the written testimony they submitted.

In working with the NAIC on the speed-to-market issue, we have always been candid with regulators about CARFRAs advantages and shortcomings. We have always found that being candid and honest with the NAIC–and with Congress and other policymakers–is the best approach to take. Sugar-coating the issue will help neither the regulators nor the regulated–and it certainly wont help the consumers we are all trying to serve.

Finally, you characterize our testimony as “the latest blow to ACLIs support of state regulation,” saying that “ACLI now sees improving the efficiency of state regulation as a survival issue.” Where has the National Underwriter been? There is nothing new about ACLIs view that improving state regulation is one of the most critical issues confronting our business. That has been ACLIs clear, consistent and transparent message in all of our communications since ACLIs Board first adopted its dual-track approach to regulatory reform in June, 2000. And all of those communications have been distributed publicly and remain available to any interested party on the home page of ACLIs Web site, www.acli.com.

It is impossible to imagine a scenario for the reform of life insurance regulation in which state regulators will not play a leading role–regardless of whether a federal charter becomes an option. It is ACLIs view that even in a dual charter environment, the majority of the nations nearly 1,500 life insurance companies would choose to remain state-regulated. ACLI is dedicated to serving the interests of all its members across the broad spectrum of the life insurance industry. And that is why working with regulators to improve the state-based system remains Job One.

Gary Hughes

Senior Vice President &

General Counsel

The American Council of Life Insurers

Washington, D.C.


Reproduced from National Underwriter Life & Health/Financial Services Edition, July 20, 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.


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