Dissatisfied with the answers he’s received from the group itself, U.S. Rep. Ed Royce, R-Calif., is turning to Federal Insurance Office Director Michael McRaith with a request that his office, a branch of the U.S. Treasury Department, review the regulatory operations of the National Association of Insurance Commissioners.
Royce has been engaged for some time in a quest to define what, exactly, the NAIC is – a regulator, a private nonprofit, or neither? In a July 12 letter to McRaith, Royce alludes to the U.S. Supreme Court’s 1960 Federal Trade Commission v. Travelers Health Association decision, which included the court’s view that Congress intended to explicitly outlaw “private regulation” of insurance markets when it passed 1945’s McCarran-Ferguson Act.
But despite the NAIC’s protestations that it is not a regulator and has no regulatory authority, Royce cites several examples of what he sees as the NAIC engaging in this sort of legally prohibited private regulation.
Among the specific examples Royce references is a December 2011 letter from the NAIC’s executive board to that of the System for Electronic Rate and Form Filing, or SERFF, instructing them that the board “is responsible for furthering the regulatory activities of the NAIC by providing for the overall improvement of insurance regulation through voluntary participation in the SEFF system,” while also directing the SERFF board to “support the use of SERFF for regulatory initiatives.”
Royce also points to press releases from the NAIC and individual state regulators that appear to describe the group’s regulatory authority, as well as NAIC-initiated multistate market conduct examination reports.
“Serious questions arise when the actions listed above are taken by an organization with a $70 million budget that does not follow open meetings laws, does not appropriate its budget through a public authority and does not abide the same standards of due process as its members,” Royce wrote.
The congressman concluded with a series of questions seeking McRaith’s thoughts on the NAIC, what authority it has and should have, what restrictions it should be subject to, and how it could be made more transparent.
It’s all fascinating stuff that should take on additional import as we await the release of the now six-months-delayed FIO report on improving the U.S. insurance regulatory system. We’ve had our own issues with the NAIC’s transparency – namely, why it is that they are allowed to earn tens of millions in fees through their monopoly on the sale of statutory insurance data that was collected with taxpayer resources – and really hope McRaith’s office will ultimately weigh in on that issue, as well.