The Consumer Federation of America (CFA) released a study which reportedly found that at least 40 percent of the leadership of the National Conference of Insurance Legislators (NCOIL), an organization that offers model bills and resolutions on how to regulate insurance, have worked for or with the insurance industry.
Furthermore, most of these NCOIL members reportedly have current business ties to the insurance industry, the CFA said. NCOIL, which says its primary mission is to “help legislators make informed decisions on insurance issues,” has taken a series of recent positions on high-profile insurance issues that are favorable, if not identical, to insurance interests and have reportedly frequently undermined consumer protections.
NCOIL identifies itself as “an organization of state legislators whose primary area of public policy concern is insurance.” It claims to have had a number of public policy successes at the federal and state level. CFA identified the occupation of every state legislator who serves in a leadership capacity for NCOIL, as noted by these legislators in their official biographies. Of these 57 legislators, 23 (40 percent) were affiliated with or conducted business with insurance interests. This included legislators who identified their current or previous part- or full-time occupations as “insurance”, insurance agents, claims representatives, agency owners or insurance underwriters. This figure also includes legislators who were attorneys who practiced or whose firms practiced insurance.
NCOIL holds national meetings and seminars, publishes books, issues reports, proposes model state laws, and testifies before Congress on a wide range of prominent insurance issues. On several issues that are currently being debated in Congress and the states, NCOIL has offered recommendations that would negatively affect many insurance consumers, recommendations that often mirror insurance industry proposals.
For example, on May 6, 2003 Illinois State Senator and insurance agent Terry Parke offered Congressional testimony on NCOIL’s proposals to improve oversight of “market conduct” abuses by insurance companies. Parke’s written testimony did not comment on the state regulatory failures that led to well-known market conduct abuses that cost consumers millions of dollars, such as the infamous life insurance market conduct abuses by the nation’s largest insurers such as Prudential and Met Life. Instead, Parke offered recommendations that would allow insurance companies to “self certify” that they are complying with market conduct requirements and would largely restrict oversight of insurance companies to the state where the company is headquartered.
NCOIL has also offered model legislation on the use of credit scoring for insurance purposes, which has been adopted by several states. The legislation would allow insurers to continue to use credit scores to grant insurance policies and establish rates, even though serious concerns have been raised about the logic of using credit history to predict consumer accident propensity (why would getting laid off in a recession make a person a worse driver?), the inaccuracy of these scores, and the disproportionate impact that this practice has on low income and minority consumers. NCOIL’s model bill would only ban the use of credit scoring if it is the sole factor used in the underwriting or pricing of insurance, which means that the bill offers no protection, as credit scoring is never the sole factor used for these purposes.
The NCOIL credit-scoring bill was developed at the behest of the industry, the CFA alleged, that realized that real reform might emerge as consumers across the nation expressed outrage over higher prices due to consideration of irrelevant credit histories. The NCOIL vote on this was telling. Members from five states (Michigan, New York, Vermont, North Dakota and Louisiana) accounted for 60 percent of the vote. Members from North Dakota represented 8 percent of the vote (its population is 0.2 percent of the national population). At least seven of the 25 on the committee are employed by the insurance industry. The vote does not appear to be representative of much other than insurer wishes.
While not every proposal NCOIL offers is reportedly anti-consumer, the CFA said, many are. Other examples of recent anti-consumer moves by NCOIL reportedly include:
—After years of effort, consumer groups persuaded the National Association of Insurance Commissioners (NAIC) to adopt a credit personal property insurance model bill with a 60 percent loss ratio standard, which is necessary because credit insurance is added to a sale of some other product with huge, often hidden commissions being paid to the seller. Because the seller selects the insurer, not the customer, credit insurance suffers from “reverse competition” driving prices up. Thus a loss ratio limit is vital to control cost. A short time after NAIC acted to control the loss ratio, the industry went to NCOIL, who had never worked on the issue, and got them to issue a resolution opposing the loss ratio standard. If NCOIL prevails, consumers who purchase this form of credit insurance will pay millions of unnecessary dollars.
—Consumers requested that NCOIL adopt a consumer participation program, like that sponsored by NAIC, in which a few consumer representatives can come to the meetings to present consumer positions made possible by funding from NCOIL for the participation expenses, with the consumer groups supplying the time of the advocate. Not only did NCOIL reject this mechanism for allowing consumer input, they also voted down the more modest measure of waiving registration fees for consumers, effectively shutting out all consumer input from their meetings.
—NCOIL adopted a property/casualty insurance regulatory model bill that is intended to cut consumer protections by reducing regulatory authority. The model goes so far as to say that the model should not be adopted if a state has gone even further in removing consumer protections than the bill proposes; i.e. the model is only recommended for use when it lowers protection but is not recommended for use if it raises protections. The model does not require the insurer to even file the rate increase until 30 days after it begins to charge consumers more. The commissioner, under the model, could not disapprove even an excessive rate if the market was “competitive” under a set of standards that would make a finding of non-competitiveness nearly impossible.
—NCOIL’s Insurance Compliance Self Evaluation Privilege Model Act would give insurers a privilege of secrecy for anything they claim as “self-audit” effectively allowing the industry to shield itself from responsibility for its market conduct actions.
—NCOIL’s proposed Resolution on Asbestos Litigation tracks the insurer position in the federal debate.
NCOIL is made up of few state legislators from some states. Of the 51 primary jurisdictions in the US, only legislators from 34 (67 percent) are members of NCOIL. NCOIL is made up largely of those legislators who maintain current business ties to the industry. Participation within even the states choosing to be part of NCOIL is wholly voluntary for the state legislator, with those in the insurance industry or interested in insurer campaign funds more likely to attend than others. NCOIL does not have consumer representation routinely present at its meetings. NCOIL meetings are dominated by large numbers of insurance industry representatives who make one-sided presentations to NCOIL delegates who are predisposed to agree with the industry position. Historically, much of the funding for NCOIL comes from the insurance industry, the CFA concluded.
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