State insurance regulation is at a critical crossroads and achieving regulatory modernization in states in 2004 must be a top priority for insurers and state regulators, the National Association of Independent Insurers (NAII) told the NAIC Industry Liaison Committee during the NAIC’s recent winter national meeting.
“Some modest improvements were made in the states in 2003, particularly regarding the movement away from prior approval laws,” said Robert L. Zeman, NAII vice president, state government relations. “However, more sweeping regulatory modernization changes need to be made quickly in 2004. Congress will be keeping a watchful eye on developments as they consider proposals to expand federal oversight of the industry.”
Congress held hearings and the General Accounting Office released a detailed report earlier this year entitled: Insurance Regulation: Common Standards and Improved Coordination to Strengthen Market Conduct Regulation. The report essentially recommended that much more modernization is needed and needed quickly. In addition, the Fair Credit Reporting Act was reauthorized this year, generating an increased interest in the regulation and oversight of insurance activities by insurers as well as some members of Congress.
Zeman said that some states made good progress in moving toward regulatory modernization. New Hampshire, where a comprehensive use-and-file system was adopted, Louisiana, where flex rating was a stepping stone toward greater reform down the road, and New Jersey, where decades of price controlling bureaucracy were scrapped in favor of a more competition-driven system, were cited as great examples of 2003 successes.
“Consumers in those states are already beginning to reap the benefits of a more modern regulatory system,” said Zeman. “They have more companies to chose from and more coverage options. In addition, the cost of insurance ? particularly in New Jersey ? has started to drop as a direct result of increased competition and less costly regulation.”
Encouraging words were heard from new 2004 NAIC President, South Carolina Insurance Director Ernst Csiszar, a strong supporter of regulatory modernization — including personal lines — during the next year. Personal lines modernization has a tremendous impact on the market place and Zeman used the example of South Carolina where sweeping modernization changes in its auto system have led some companies to re-enter the market and others to reduce rates.
“Successful efforts to modernize personal lines regulation is contagious,” said Zeman. Thanks to the positive results achieved in New Jersey, Massachusetts ? another poster child for the failure of over-regulation — is now considering major auto reform. ”
During the Industry Liaison Committee NAII and other industry representatives asked if the NAIC planned any specific regulatory modernization efforts in conjunction with its renewed commitment to the subject.
“Each year NAII develops it own state-by-state list of goals, objectives and targets. We hope that the NAIC will set goals on its regulatory modernization efforts with the same sense of urgency,” Zeman asked. “0ur hope is that by the end of the commissioners’ retreat in February there would be a list specific goals for NAIC action in certain states.”
Regulators responded to the NAII’s comments and agreed to work with insurers to find “common ground” states and issues where insurers and regulators can work together to enact meaningful reform in 2004. Zeman also questioned the regulators about the ASSURE program and its place in preserving state regulation.
“Our understanding is that the ASSURE program was designed to facilitate creation of individual state grassroots coalitions that would stand ready to object if and when Congress began to seriously consider optional federal charter legislation,” Zeman said. “In our view, in order to be successful, ASSURE coalitions must consider what can be done within the boundaries of their own states to modernize regulation–rather than just serving as a standing grassroots network.”
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