Worth More Than A Dime

As reported in National Underwriter’s Jan. 22, 2007, cover story, “non-insurance regulators” have increasingly been muscling in on state insurance regulatory matters via administrative and enforcement actions, typically involving sale of certain insurance products. Non-insurance regulators include the offices of state AGs, securities and commerce departments, and governors.

These investigations typically do not skewer insurance products themselves, nor do they nab the product issuers. Rather, they go after misrepresentations about insurance products made to consumers by agents, advisors and reps. Some also go after credentialing and suitability, especially involving sales to seniors.

Some state insurance regulators have been a bit sanguine about the non-insurance regulatory moves, saying turf is turf. That is, if the actions involve regulations under the jurisdiction of the other regulatory bodies, it is not the insurance department’s place to object, intervene or criticize.

Still, many industry professionals and certain insurance regulators have been privately seething over what they believe to be the non-insurance regulators’ intrusion into state insurance regulatory purview. They do not quibble over the rooting out of misconduct; they quibble over who is taking the action and what rules are applied. They worry that the actions create confusion over which regulators govern the industry and for what, and which regulators the public should to turn to and for what.

Some critics note that similar concerns have been simmering over federal interest in regulating annuities, and that the NASD and the Minnesota Department of Commerce last year co-hosted an Annuity Roundtable in a move to air jurisdictional issues and create clarity. That session, held in May 2006, has not brought formal change as of yet, but at least it has helped put key issues out in the open, they say.

Some interests have been hoping that some “body” would make a similar collaborative effort at the state level–if not the National Association of Insurance Commissioners, then somebody else.

Now, in the NCOIL study, they may get just that, or at least a start.

In his remarks, Michigan Sen. Sanborn said, “The allocation and delegation of state authority to regulate the business of insurance is clearly a legislative matter.” But, as can be seen, the lines of demarcation are not all that clear anymore.

Let’s hope the NCOIL researchers really are objective and consider all aspects of the situation. The public deserves it, and so do the commercial interests and regulators who serve the public.