Is ‘Speed To Market’ Impossible Without Regulatory Reform?
News item: Recently, at the urging of state and federal regulators, a Congressional panel voted to ease regulations on banks, thrifts, credit unions and other federally insured institutions.
In other news, the National Association of Insurance Commissioners has been working on a system to provide insurers with a mechanism (“Speed to Market”) to bring new products to market more quickly in order to compete with banks, thrifts, credit unions and other federally insured institutions in the global marketplace.
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Speed to Market is a great concept that is doomed to fail as long as insurance companies are burdened with layers upon layers of outdated and duplicative regulations and laws. In other words, there is no speed to a market in the absence of regulatory relief.
The first step is to avoid the need to dig out from under all of those layers in the first place. This can be done by avoiding the creation of even more additional layers. The NAIC has finally begun to coordinate new model laws and regulations with the hundreds of existing models. While some work has been done that deserves special recognition in this area, the problem remains systemic.
However, what is the larger answer to this problem? One answer may be provided by a system utilized by the National Conference of Insurance Legislators (NCOIL): Sunsetting.
The NCOIL system provides for models to automatically sunset every two years. This process forces the NCOIL committees of original reference to review all models and determine whether they are viable and readopted, amended or be allowed to sunset (expire). The system mandates an ongoing, comprehensive review of all existing laws.
Given the astounding number of committees, task forces, working groups, subcommittees, etc. at the NAIC and the hundreds of models currently in place, a rigid system may not be workable if it is based on a two-year cycle. However, the concept must not be dismissed as unworkable simply due to the size of the task. The issue should be discussed openly.
Is there really a problem? You may ask why we should care if the NAIC creates new models to replace others without actually replacing the original models. The impact on all insurance companies and insurance departments is clear: insurers must comply with the new and old models, irrespective of whether the old models will stay on the books or be repealed, until the department actually repeals the old model, if ever.
This system drives up the already high and ever spiraling cost of compliance, and, thus, the ultimate cost of insurance to the consumer. From the insurance department standpoint, the regulators must implement all old and new models, a costly proposition in a time of shrinking state budgets.
A case in point is the effort to create a new Life Insurance and Annuities Suitability Model Regulation and Act. There are at least four other models, which have the same–or strikingly similar–Purpose Statements as enunciated by the draft model regulation. The drafting process for the Model Act and Regulation continues without any real consideration of the duplication of regulation or the failure to enforce the existing laws and regulations. This case calls for review and sunsetting.