D.C. Commissioner Floats Plan To Streamline Regulation

Mr. Mirel said he believes this "mutual recognition process" can solve many of the problems facing state regulation.

In an interview with National Underwriter, Mr. Mirel said his plan is really not that different from the driver's license system. Each state recognizes as valid any driver's license issued by another jurisdiction, he noted. If drivers had to get separate licenses from every state, Mr. Mirel said, it would be impossible to drive across the country without huge administrative costs and headaches.

He said that under his plan, if an insurance company is licensed in a jurisdiction that is accredited by the Kansas City, Mo.-based National Association of Insurance Commissioners, or from a state that has standards of review comparable to those in D.C., that will serve as prima facie evidence that the company is fit to receive a D.C. license.

Mr. Mirel added that his plan does not mean that D.C. or any jurisdiction must give up its authority to conduct financial or market conduct examinations. These can still be done after the license is granted, he said.

Mr. Mirel said that while he was developing his plan, one possible result he was worried about was a "race to the bottom." (That is, insurance companies getting licenses from jurisdictions with weak standards and then seeking to enter other jurisdictions.)

However, he said, he believes he has a way to resolve that issue. Under his plan, if an insurance company does not conduct at least 20 percent of its business in its state of domicile, it must submit a license from the jurisdiction where it conducts the largest portion of its business.

In a memo to other regulators, Mr. Mirel said that he issued the bulletin unilaterally. Thus, it does not require reciprocity from other jurisdictions. However, he urged other regulators to make the process reciprocal by adopting the same or a similar bulletin.

Mr. Mirel added that if there is interest in the idea, and it works, the same kind of deference could be granted to certain products, such as life insurance and annuities.

To his "surprise and delight," Mr. Mirel said, the initial response to his plan has been positive. A lot of interest was expressed by his colleagues when he presented the plan at a meeting of NAICs Northeast Zone last month, he said.

If the plan was made reciprocal by all members of the Northeast Zone, Mr. Mirel said, that would be a terrific start.

In addition, he said, some insurance companies have said it is a good idea.

However, Mr. Mirel said his plan doesn't necessarily need the backing of the NAIC to succeed. "I don't think I will ask the NAIC to endorse the plan," he said. "If enough states buy it, we won't need NAIC's endorsement."

Jack Dolan, a representative of the Washington-based American Council of Life Insurers, praised Mr. Mirel for offering "a good and refreshing idea on improving insurance regulation." ACLI, he said, is very concerned about uniformity and eliminating the differing state rules governing the industry.

However, Mr. Dolan said, ACLI wants states to have the resources they need to regulate uniformly. Mr. Mirels plan doesnt appear to directly address those critical issues, he said. Inconsistent laws, department funding levels and administrative approaches from state to state may render the plan problematic in some contexts, Mr. Dolan added.

However, he said, Mr. Mirels plan is a valuable contribution to the debate on regulatory reform.

In his memo to other regulators, Mr. Mirel noted that state insurance regulation is under attack. The NAIC, he said, has worked hard to find ways to speed up the approval process and come to grips with the lack of uniformity in state laws and procedures.

While he supports efforts such as forming an interstate compact, he said that his plan would allow the system to work better without the need for additional legislation and with no loss of authority for individual commissioners.

"If we were able to trust each other more, and have confidence in the work of our fellow regulators, a great deal could be accomplished on a voluntary basis," Mr. Mirel said.

Reproduced from National Underwriter Property & Casualty/Risk & Benefits Management Edition, January 6, 2003. Copyright 2003 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.