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NAIC Maps Out Regulatory Reform Plan

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NU Online News Service, June 15, 2004, 1:05 p.m. EDT, San Francisco – Leaders of the National Association of Insurance Commissioners have come up with a road map for creating a state-based, national system of insurance regulation.[@@]

The Kansas City, Mo., group’s road map document targets 15 areas for modernization. The targets include market conduct, uniform standards, company and agency licensing, life insurance, property-casualty insurance, and developing an interstate product filing compact for health insurance.

Even if a bill addressing insurance reform does not advance in the few remaining congressional session days, the issue is going to come up again, NAIC President Ernst Csiszar, the South Carolina insurance director, said here at the NAIC’s summer meeting.

Consequently, Csiszar said, regulators had to respond to a request by U.S. House Financial Services Chairman Michael Oxley for advice about modernizing state insurance regulation.

Here are some of the points that came up in discussions about the road map:

- Access to FBI finger prints: Csiszar said using FBI fingerprints could advance uniformity of producer licensing. If the NAIC had had access to FBI fingerprints, state insurance regulators could have learned about Martin Frankel’s activities earlier, Csiszar said.

- Eventually, the market conduct process could become an accreditation standard, Csiszar said.

NAIC Vice President Jim Poolman, the North Dakota insurance commissioner, said establishing a market conduct accreditation process is a reasonable goal because the NAIC’s financial accreditation process has worked so well.

- Uniform market conduct standards should be based on elements such as centralized data collection, structured and uniform market analysis, uniform examination procedures, and interstate collaboration.

- The NAIC is working on streamlining company licensing through the NAIC’s ALERT system.

- The NAIC could handle producer licensing with a central electronic licensing system based on 100% reciprocity if states had direct access to FBI fingerprint data and if states could share information on a confidential basis.

- Life insurance reform would include adoption of an interstate product filing compact and an accompanying set of product standards.

Michael Lovendusky, a representative of the American Council of Life Insurers, Washington, expressed disappointment about the road map contents.

“I regret to say that, after a cursory look at the 20 pages, it seems that NAIC has failed to take full advantage of the opportunity that the House of Representatives is offering to the states,” Lovendusky said. “We do not see an urgency for reform.”

Lovendusky added that “there is a slow motion erosion of the insurance base to banks and securities firms.”