State officials told Congress this week that they are making progress in modernizing insurance regulation and that further improvements should be implemented by them as the debate in Washington over whether federal oversight of the industry is a good idea continued.
On behalf of the National Association of Insurance Commissioners (NAIC), New York State Insurance Superintendent Eric Dinallo testified before the U.S. House Subcommittee on Capital Markets, Insurance and Government Sponsored Enterprises about the states’ ongoing efforts to improve insurance supervision.
“The state-based regulatory regime has been very effective for more than 150 years,” Dinallo said. “Insurance oversight has been rigorous, resulting in high regulatory compliance and avoiding the level of insolvencies and market meltdowns we have seen in other sectors of the U.S. financial community. Indeed, our national solvency system has ensured that companies have the wherewithal to pay claims while remaining competitive and profitable.”
Looking forward, Dinallo said insurance regulation must continue to stay up-to-date with changes in the industry — including the increasingly global nature of the insurance marketplace.
He said state insurance regulators are “actively developing” proposals to modernize the state-based regulatory framework and he outlined several principles of reform for achieving uniform standards and processes:
Specifically, Dinallo noted:
Any option(s) adopted should include enforceable uniform standards in targeted areas of insurance regulation.
Any entity created to implement reforms or uniform standards should be developed and implemented by state regulators, who are the public servants closest to those whom insurance is designed to benefit. State regulators should both set the standards and enforce compliance.
Any option(s) adopted should include uniform standards made applicable to all states.
Any entity created should have an equal voice with other federal financial regulators and have some level of federal accountability.
Any entity created should be the primary U.S. contact for coordination with international insurance regulators.
Lastly, Dinallo said any reform effort that includes modernization of state laws and standardization should be taken over time, to allow for correction should the markets or consumers be placed in jeopardy.
“As the insurance industry has grown, the state regulatory community has adapted,” Dinallo said. “We have responded to this dynamic environment through increased uniformity, interstate collaboration, leveraging of technology and enhanced operational efficiencies.”
“State insurance regulators have made great strides in increasing market efficiencies while maintaining consumer protections,” added NAIC President and Kansas Insurance Commissioner Sandy Praeger. “We strongly caution against federal intervention in a state-based system that is working for consumers and industry alike.”
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