Claiming that progress is already underway toward building a stronger, national, state-based system of insurance regulation, the National Association of Insurance Commissioners (NAIC) told the Senate Committee on Banking, Housing and Urban Affairs that any establishment of a federal oversight entity would do more harm than good.
Gregory V. Serio, New York’s Superintendent of Insurance and chair of the NAIC’s Government Affairs Task Force, told the committee that state regulators, consumer groups and state legislators are moving forward on several reform fronts. Providing federal preemption or an optional federal charter now would only impede that progress, he said.
“We strongly believe that an effective system of national regulation does not mean federal regulation,” said Serio. “While we have enjoyed a very productive dialogue with Congressional leaders on the innovations made in state-based regulation, involving the federal government in dual regulation will not simplify the complexity of insurance issues, nor diminish the number of issues, nor smooth the process of regulation. More likely, it would simply add layers of uncertainty, confusion and cost for policyholders and claimants.”
Serio cited the NAIC’s plan, titled A Reinforced Commitment: Insurance Regulatory Modernization Action Plan, and the NAIC’s more recent “road map” for regulation that include specific goals and accomplishments in several key areas, including consumer protection, market regulation, speed to market for products, solvency regulation and licensing. The plan sets out specific goals and timetables for accomplishment of each.
“Significantly, our specific regulatory program targets were developed with extensive input from industry and consumer representatives,” he said. “We have an aggressive timetable, and we believe our plan satisfies every legitimate complaint regarding inefficiency and redundancy in the state system. Even if a federal system were set up tomorrow, there is no way it could achieve these same improvements on a schedule that comes close to ours.”
Noting the complexity and wide ranging aspects of insurance, Serio contrasted it with the banking industry, which many have pointed to as a system that works under a “dual” state and federal chartering system. Insurance is not the same, he said. He pointed out:
• During 2002, state insurance departments across the country handled approximately 4.2 million consumer inquiries and complaints regarding insurance policies or companies.
• Nationwide, state insurance departments employed more than 13,000 people and spent approximately $947 billion to be the watchful eyes and helping hands on insurance problems. States helped consumers collect tens of millions of dollars in claims payments.
• The entire state insurance system is authorized, funded and operated at no cost to the federal government.
• Current natural disasters, including hurricanes in Florida and Alabama, and fires in California, highlight the advantages of state insurance oversight. State officials are in the best position to respond quickly, and to fashion remedies that are responsive to local conditions.
“There is no way the federal government could possibly replicate the expertise of state legislators, regulators and courts to successfully interpret the laws of 50 states and the District of Colombia,” Serio said. “Moreover, there is no reason for the federal government to do so when the states have a modernization plan and timetable in place to get the job done.”
Serio testified in front of the committee, along with industry and consumer representatives, about the current state of insurance regulatory modernization. While the House of Representatives has held numerous hearings in recent years, this is the Senate’s first hearing on the issue.
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