Massachusetts To Make Insurers' Boards More Accountable

Companies will be examined for corporate governance and then ranked by the department in order of work that needs to be done, she explained, with that work being done during a financial exam.

What many board members fail to realize, Bowler said, is that if there is not an appropriate response, then a regulator in any of the 51 jurisdictions can prevent that company from writing business.

Two issues important to the competitiveness and strength of New York life insurers are putting a new annuity nonforfeiture minimum crediting rate in place and advocating a lower premium tax rate, said Thomas Workman, president and CEO of Life Insurance Council of New York.

In March, the National Association of Insurance Commissioners, Kansas City, Mo., adopted revisions to the Standard Nonforfeiture Law for Individual Deferred Annuities that lowered the minimum nonforfeiture interest rate on fixed annuities to an indexed rate that could not be below 1%. A temporary regulatory measure had lowered the rate to 1.5% from 3%.

Insurers are currently trying to enact that change in New York, Workman said. Presently, the initiative has been advanced through New Yorks Senate Insurance Committee, and efforts are still under way to move it through the Assembly insurance committee, he said.

Life insurers are also trying to lower the premium tax rate schedule in the budget currrently under discussion from 2% to 1.5%, he added, since paying the higher rate would make New York domiciled insurers less competitive with companies domiciled in other states.

New York Superintendent of Insurance Greg Serio said more efficient regulation such as the NAIC interstate compact is being advanced. But such an initiative has to be “shoehorned into outdated, anachronistic statutory structures.” If a compact ultimately is not approved, he said, it will be because “a statutory shift could not be achieved to make it happen” and not because of a lack of effort on the part of regulators.

The most effective regulation, according to Serio, is action by a state regulator that not only fines an offending party but, more importantly, one that requires corrective action. For instance, on the issue of internal/external health insurance reviews, corrective action has proved effective, he added. “Given the level of negative response, I think that we are onto something.”

Reproduced from National Underwriter Edition, May 5, 2003. Copyright 2003 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.