There were some intriguing regulatory reform alternatives floated at two separate industry gatherings this month. At PLUS, one professional liability underwriter suggested that the federal government should oversee most commercial lines, while leaving personal lines with the states. Meanwhile, at PCI, one regulator suggested that bigger states get more voting power at the NAIC when setting national policy.

I am particularly intrigued by the voting power issue raised by Washington State Insurance Commissioner Mike Kreidler, who wisely observed that you cant have the Northern Marianas Islands with the same vote as the 19 million population of New York. It isnt reasonable.

He urged the NAIC to reform its structure to become much more responsive to large premium states, warning that without such a change, the group might lose power to a federal regulator.

It sounds like it makes perfect sense–insurance powerhouses such as New York and California should have more say over the industry's regulation on a national level than Wyoming and New Mexico, right? Our Founding Fathers had a similar debate in the Constitutional Convention, with the very undemocratic U.S. Senate created to give unequal power to smaller states that were spooked about losing control to a strong central government.

However, major change doesn't come easy to the NAIC or its individual members, and this one would be a whopper.

As for the proposal on splitting regulation by line of business–floated at PLUS by Leib Dodell, president and CEO of Media/Professional Insurance in Kansas City, Mo.–I think it represents the quite understandable frustration of those in the specialty markets whose survival depends on acting quickly to fill market needs, only to come up against the time-consuming and expensive procedural hurdles set up by state regulators.

While the notion has merit, given the circumstances, I think it's unlikely to be realized. If Uncle Sam ever decides to get into the insurance regulatory business, it's either going to be via an optional federal charter, or by setting benchmark national standards for state regulators to follow. Regulating by line is going to be too complicated for Congress to sort out.

What do you think? Do you like either proposal? What would be the result–good and bad–if either or both ideas were ever adopted?

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Regulatory Reform Proposals Proliferate

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