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Regulation and Compliance > State Regulation

Pressures On The NAICThen And Now

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Naples, Fla.

The activities of the National Association of Insurance Commissioners always claim a large piece of the program at the meetings of the National Alliance of Life Companies, and this year’s spring meeting was no exception.

In a session that looked at the situation the NAIC has been facing since Gramm- Leach-Bliley was enacted in 1999, Ann Henstrand, vice president with MetLife, New York, said that while there are many parallels between what the NAIC is doing today and what it did after Rep. John Dingell’s Failed Promises report was issued in the early 90s, there are also key differences.

The Dingell report came out as a result of massive insurance company insolvencies in the early 1990s and put a lot of pressure on the NAIC to get its financial reporting regulatory act together. Similarly, GLB has put pressure on the NAIC to work out the inefficiencies of the state regulatory system in the face of streamlined federal regulation of financial services.

Among the differences between now and then that Henstrand enumerated are:

–Now, federal chartering proposals are coming from insurers and trade groups, not from Dingell, D-Mich., and his staff;

–Relations between state insurance commissioners and state legislators are much stronger today than they were before;

–The NAIC’s office in Kansas City is much larger today, which provides a lot of “institutional momentum;”

–A strong web of relationships has formed between state regulators and their federal counterparts in the last few years. Now, many federal representatives show up at NAIC meetings and also hold closed-door meetings with insurance departments around the country. “There is a strong relationship building program going on.”

During the same session, Brian Atchinson, executive director of the Insurance Marketplace Standards Association, and formerly Maine Insurance Superintendent as well as a former NAIC president, said GLB “creates the situation where the clock’s going to run out at some point for state insurance regulation.”

Atchinson looked at a couple of areas–speed-to-market and market conduct–where, he said, “far too little has been done to harmonize state regulation.”

Regarding speed-to-market efforts for insurance products, Atchinson said “it’s a nice myth, but far from reality.” The NAIC’s main initiative in this area so far–the Coordinated Advertising Rate and Form Review Authority–has just been “given lip service by many states,” he said.

Atchinson predicted that state deviations in the area of product approval “will continue to be an insurmountable hurdle until there is a stick to go with the carrot.”

He also said that speed-to-market “will be one of the greatest benchmarks by which state regulation will be judged in the next one or two years.”

Regarding market conduct, Atchinson said the “time is long overdue” for states to coordinate market conduct exams.” He called the lack of consistency among the states in quality and outcome of exams “indefensible.”

Henstrand said the past shows that it took a federal threat for anything to happen at the NAIC, so what is happening now is a good thing. But she added that if the NAIC can’t solve speed-to-market–which she called the “poster child of the inefficiencies of state regulation”–then she doesn’t “have much hope” for state regulation.

Atchinson ended by urging insurance companies to get in touch with their governors, commissioners and other state officials and tell them that “they want the state to get on board with speed-to-market and market conduct.”

Reproduced from National Underwriter Life & Health/Financial Services Edition, April 29, 2002. Copyright 2002 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.