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The top state government affairs official for the National Association of Mutual Insurance Companies encouraged insurance regulators to exert leadership in their states to achieve personal lines rate modernization as the key to achieving fundamental reform for the property/casualty insurance industry.
“When regulators say personal lines rating can be done on a competitive basis, their legislatures listen, laws are changed and markets improved,” stated Roger H. Schmelzer, NAMIC Senior VP for State and Regulatory Affairs during the recent summer National Association of Insurance Commissioners meeting Saturday in San Francisco.
Schmelzer spoke in response to the NAIC’s release of recommendations to the U.S. House Financial Services Committee Roadmap for Reform of the American insurance industry first announced by Congressman Michael Oxley, R-Ohio, at the March NAIC meeting.
He noted that NAMIC is committed to reform state regulation; however, the organization also supports Oxley’s efforts because he seeks a state-based solution, dismisses the prospect of a federal regulator, and endorses the concept of pricing freedom for personal lines carriers. Schmelzer called Congressman Oxley’s effort “serious and should be treated as such, which means that regulators, legislators and industry should be feeling the pressure to make changes in the states that would make federal intervention unnecessary. That is exactly how we have taken it at NAMIC.”
While the NAIC recommendations include language that encourages “a movement toward various forms of competitive rating where feasible, state regulators need to come out strongly in favor of specific ratemaking reforms governing personal lines carriers in their state,” Schmelzer continued. He suggested that regulators ask themselves “what value is added by requiring prior approval of insurance rates” and to consider successes in Illinois and South Carolina as well as competitive rating laws enacted in Louisiana and New Jersey.
NAMIC supports a “reformed, state-based system of insurance regulation in which property/casualty companies can compete openly to the benefit of their customers,” Schmelzer stated. The cornerstone of which is rate modernization. “The evidence is clear that where competitive rating is permitted, consumers benefit. If that wasn’t
the case, states such as Louisiana and New Jersey wouldn’t pass these laws,” he continued.
“The NAIC and its members have taken strong positions in favor of reforms for the life industry and commercial carriers. We agree those are essential to creating a world-class regulatory climate, but is only part of the job,” Schmelzer stressed. “Approval of the interstate compact for life products and commercial lines reform in every state is an incomplete public policy fix for the U.S. insurance industry and merely opens the door for the Congress to do it instead,” he concluded.