Insurers Issue Blueprint for Self-Certification of Rates and Forms

September 5, 2002

Insurance regulators wishing to further regulatory modernization should begin to adopt a workable self-certification process to approve rates and forms, according to insurers.

In a letter to the National Association of Insurance Commissioners (NAIC) subgroup considering the measure, all four property/casualty insurance trade associations wrote that they “strongly believe that self-certification is a meaningful change that virtually all states could implement without the need for legislation.”

Self-certification was a recommended operational efficiency in the NAIC’s original Speed-to-Market Report issued in December 2000.

The four property/casualty trade associations—the Alliance of American Insurers (Alliance), American Insurance Association (AIA), National Association of Independent Insurers (NAII) and National Association of Mutual Insurance Companies (NAMIC)—have produced a joint document describing the industry’s vision for a workable self-certification process under the four major types of rate and form filing systems now in place in the states. It was sent to the NAIC’S Review Standard Checklist Subgroup last week.

A large part of the effort focused on detailing the certification process in a prior approval system, as this is the filing system used by many states, particularly for policy forms. It is also the system that would benefit the most from the introduction of a self-certification process.

The Joint Trade Group tried to address the issues that regulators raised about the certification process, based on the Subgroup’s survey on this issue.

The Joint Trade Group’s work product reflects the following guiding principles regarding self-certification of rate and form filings:

• Self-certification should be in lieu of, not in addition to, front-end review and regulation. Self-certifications are merely additional paperwork if the regulator is going to review all of the materials anyway.
• Self-certification should be optional. When the filer elects self-certification, it should be in lieu of prior regulatory review. Self-certification can be for all or part of filings.
• Checklists may be completed for the filer’s own internal documentation to facilitate back-end review of filings, to respond to regulatory inquiries and for market conduct reviews. They should be made available to regulators upon request. Checklists should not be required to be submitted with all filings.
• If the regulator is going to review all or part of the filing, a completed checklist can speed up the review. Checklists indicating where in the filing a particular item is addressed would be most beneficial in this instance. Electronic book marking is a nice addition, but not necessary. If the regulator is going to review the filing, self-certification is redundant and should not be required.
• Clear and objective standards in the checklists are the key to certifications and will promote industry compliance.
• If a detailed front-end regulatory review is conducted, a detailed back-end regulatory review should not be conducted, and vice versa.

The Joint Trade Group acknowledges that its blueprint describes the end product. There will be a learning curve on both sides of the fence so that insurers submit complete and compliant filings, and state regulators trust the officer-level certifications in lieu of their own front-end review, but the process must begin. The speed-to-market issue stems from the industry’s need to compete in the new financial services arena created by the enactment of the federal Gramm-Leach-Bliley Act in 1999.

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