The Property Casualty Insurers Association of America told regulators that it shares the goal of improving and modernizing the insurance regulatory system and indicated that it views the State Modernization and Regulatory Transparency Act (SMART Act) with its greater reliance on competitive markets as a positive development.
The PCI made its comments at the National Association of Insurance Commissioners’ (NAIC) Industry Liaison Committee Meeting Saturday in a forum between industry representatives and regulators, held as part of the NAIC meeting in Anchorage, Alaska.
“The move toward competitive markets, specifically in personal lines, would ensure consumers the benefits of greater competition,” stated Robert Zeman, PCI senior VP-industry and regulatory affairs. “The evidence is overwhelming that in the states with less restrictive regulatory environments consumers experience a more competitive marketplace and better options as more companies compete for business. The SMART Act would extend these benefits to consumers across the nation.”
The SMART Act discussion draft calls for a two-year flex rating period followed by an open-competition Illinois-style model for personal lines. The measure provides for a 7 percent flex-band in the first year following enactment of the legislation and a 12 percent band the second year. After the flex-band period, no state would be permitted to “require the approval, establishment or prior review of any rate charge for an insurance policy by an insurer.”
Zeman stressed that “greater pricing freedom and the reliance on competitive markets remains the highest priority of PCI and is the single most critical reform needed in the current regulatory system.”
In addition to the pricing provisions, the draft also establishes federal tools designed to effectuate state-based regulatory changes in a number of areas including market conduct examinations, company and agent licensing, personal and commercial form filing, including the elimination of so-called desk drawer rules, surplus lines coverage and financial surveillance.
With regard to market conduct provisions Zeman noted that some additions, including due process and arbitration provisions, are needed. “The inclusion of due process and arbitration is important in creating a more modernized market conduct system,” he pointed out. “Without due process insurers have little real legal recourse if they want to challenge a regulator regarding a market conduct exam or the process used to determine that a company should be examined.”
Zeman added that in looking at the big picture the reforms put forth in the discussion draft, particularly in the areas of rate and form provisions, would be a positive step in making critical improvements over existing regulation in many states.
He called the SMART discussion draft document “an important first step in the direction of modernizing insurance regulatory markets to be more competitive and reactive to consumer needs and to be more flexible in responding to market changes.
“PCI looks forward to working with the sponsors of the SMART draft, as well as with the NAIC and state regulators, as we move forward to achieving our common goal of improving and modernizing insurance regulation and state insurance markets,” Zeman concluded.
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