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Regulation and Compliance > State Regulation

Are Words Cheap?

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As a reporter, I am keenly aware of the value of words. When used to speak the truth, they are priceless. But when used to pay lip service, they can be cheap.

A recent high-level roundtable organized by the National Association of Insurance Commissioners in Kansas City, Mo., creates doubt over the phrase “protecting the consumer” and the value of those words. In theory, at least, these words should be paramount.

The roundtable, held in Washington on May 21, was attended by Sen. Richard Durbin, D-Ill., majority whip of the Senate; Rep. Barney Frank, D-Mass., chairman of the House Financial Services Committee; and Rep. Earl Pomeroy, D-N.D., a former state insurance commissioner, according to an article by National Underwriter’s Arthur D. Postal (see NU, May 26.)

The high-powered gathering, the article states, also included 28 state insurance regulators, 14 representatives of other state regulatory agencies as well as major trade groups including the Council of Insurance Agents and Brokers, the Independent Insurance Agents and Brokers, National Association of Mutual Insurance Companies, and the Property Casualty Insurers Association of America.

In a brief item highlighted on the NAIC website, the trade group notes that insurance commissioners and senior regulatory staff are attending a 2-day educational meeting with members of Congress including Durbin, Pomeroy and Sen. Ben Nelson, (D-Neb.).

But consumer representatives are not mentioned in either of these accounts which seems ironic for an organization that is making a case for its relevancy based on how attuned they are to consumers and their needs.

The omission was not lost on funded consumer representatives with the NAIC. In a May 26 letter to Sandy Praeger, Kansas insurance commissioner and NAIC president, Birny Birnbaum, an NAIC funded consumer representative, expresses disappointment over the fact that there was no consumer representation.

Birnbaum writes, “We are struck by the absence of any consumer organizations in the list of participants. Given that the NAIC’s mantra is that state insurance regulation is all about protecting consumers, we ask if you could explain why no consumer representatives were invited to the meeting and how the NAIC could reasonably get feedback about the prospects of an OFC or the future of insurance regulation without the views of the consumers who would be affected by such legislation.” (See Arthur D. Postal’s story on page 6, for more information.)

Birnbaum’s point is a valid one. For instance, he goes on to write that consumer representatives agree with certain points that the industry is making such as PCI President David Sampson’s position that state insurance regulation needs to be modernized.

However, he differentiates what he believes is a critical difference in approaches,

“For industry, modernization means deregulation and an opaque market and regulatory system in which virtually all industry information is non-public. For us, modernization means state insurance regulators who are better able to identify and stop market problems before the problems harm consumers; a vibrant data collection and market analysis system and a more transparent and accountable regulatory structure in which regulators do not routinely jump to jobs with the very entities they once regulated.”

It is well known that industry and funded consumer representatives have differed on issues ranging from life settlements to credit scoring.

It would have been valuable to have had another perspective provided in any discussion about the future of insurance regulation.

And, it would have reinforced the statements made by the NAIC that it best knows and can best protect consumers.


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