Blueprints In Hand, Regulators Take To The Building Process in 2003

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2003 needs to be the year that regulatory blueprints come to life, interviews with National Underwriter suggest.

All through 2002, regulatory drafting tables have been filled with efforts to remodel state regulation so it could match any regulatory structure the Feds come up with. Toward that end, product filing and market conduct surveillance are receiving a lot of attention.

Getting state legislators and attorneys general to sign on to an interstate compact creating a single point of filing for life insurance products will take a lot of convincing or “educating” during 2003, according to interviews.

The message, according to Terri Vaughan, immediate past president of the National Association of Insurance Commissioners and Iowa insurance commissioner, is that this is “logical because of the way the market is changing. It is really a national market.”

A national filing system will allow for better use of resources and higher quality life insurance products, Vaughan maintains. Toward that end, she acknowledges a need to bring that message to state officials.

The message that compact supporters intend to spread is that skepticism among consumer advocates, attorneys general, and some state legislators and insurance commissioners is unwarranted.

“There is a clear need to reach out to other groups,” says Bruce Ferguson, vice president, state relations, with the American Council of Life Insurers, which supports the current draft of the compact. Among these groups, he says, are the National Association of Attorneys General, Washington; the National Conference of State Legislatures, Denver; and the National Conference of Insurance Legislators, Albany, N.Y.

“The thought is that once these concerns are examined, many of the issues will go away,” he adds. A campaign at the state level will reach governors, legislators, commissioners and member companies, he continues.

The shape that market conduct surveillance takes in the coming year will be a balance between finalizing the blueprint with results from data calls and a “How-to Guide” for regulators, and prodding from insurers and consumer representatives to get out a product that can be used.

In 2003, data provided by life insurers, due at the very end of 2002, will be analyzed. The goal is also to flesh out the regulators “How-to Guide,” currently a regulatory resource catalogue.

The first step is developing tools and the second is implementing them, says Linda Lanam, vice president and deputy general counsel, with the ACLI.

Uniformity is an important goal and one that will take work on the part of companies as well as regulators, she adds.

The benefit of culling data, according to Lanam, is that an accurate rather than an anecdotal view of the marketplace is developed.

A concern expressed by Scott Cipinko, executive director of the Life Insurers Council, Atlanta, is “the cost of overregulation,” which he says “is forcing insurers out of business, end of story.”

But, during a discussion about the direction the NAIC will take in the coming year, Mike Pickens, NAIC president and Arkansas commissioner, said that currently insurance regulation costs 8-12 cents per premium dollar, but would cost billions of dollars under a federal regulatory program.

“Front and center” on NAICs agenda in 2003 will be health insurance, Pickens said. “Our responsibility is to shine the spotlight on what the problems are.” The drivers of health costs, he continued, are medical and pharmacological costs as well as utilization.

Pickens said universal health care is a goal for 2003, but that he did not mean a single-payer system. Rather, he said, it is a system in which everyone would have coverage, although not necessarily a one-size-fits-all system.

Ernest Csiszar, South Carolina insurance director, said that having lived in Canada, he saw from family experience that the single-payer system did not work when a family member had to wait for bypass surgery.

Texas will also be looking at health coverage during the coming year, according to Jose Montemayor, Texas commissioner.

One area the department will be investigating is how to offer and regulate HMO coverage for those who work in the United States but live in Mexico, he added.

Additionally, work will continue on developing guidelines for minimum nonforfeiture requirements for annuities and minimum guaranteed interest rates in light of the current low interest rate environment, Montemayor said.

Another issue important to life insurers, is how regulators ultimately decide to treat the issue of suitability of life insurance sales. Regulators are working to develop a model regulation that will be put out for industry comment in 2003, said Merwin Stewart, chair of the Life & Annuity “A” Committee and Utah commissioner.

And, the issue of small amount policies and multiple policies will continue to confront regulators in 2003. Recently, Illinois Insurance Director and NAIC Vice President Nat Shapo, said regulators should consider a regulation similar to the one that becomes effective July 1, 2003, which makes sure that insurance companies search to see if a deceased insured owns more than one policy.


Reproduced from National Underwriter Life & Health/Financial Services Edition, December 30, 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.