AIA: NAIC's Budget, Surplus Bloated
NU Online News Service, Nov. 3, 3:25 p.m. EST?The association representing United States insurance regulators has too large a surplus and is spending too much on meetings, travel and other projects, accused an insurer trade group.
The National Association of Insurance Commissioners' 2004 budget should be set at an amount not to exceed the projected revenues and expenses of 2003, the Washington, D.C-based American Insurance Association contends.
"In an era in which state agencies are reducing budgets and re-evaluating essential services, the expanding budget of the NAIC seems to defy the belt-tightening reality of its government constituency," said Phillip Carson, AIA's senior counsel in a statement.
In a recent letter to the NAIC, Mr. Carson noted, "Rather than increasing fees upon the regulated, AIA believes the prudent approach is to reconfigure NAIC activities to achieve cost savings so that fees can be reduced."
Specifically, AIA is recommending an annual 10 percent subsidy from NAIC's surplus to its general fund until the surplus is brought down to approximately $20 million.
"The NAIC is a tax-exempt, not-for-profit organization, which now expects its surplus to exceed $41 million by the end of 2004," Mr. Carson said. "Unless NAIC is expecting a dramatic reduction in revenue, there is no reason for the build-up of such a large surplus."
He noted that "if, in fact, a substantial drop-off in revenues is expected, there ought to be frank and open discussions about this expectation and the timeframe over which the reduction is to occur."
Among the cost-cutting measures proposed by AIA are moving all NAIC meetings to Kansas City, Mo., where the NAIC is headquartered.
The change, he said, would eliminate the need for most NAIC staff travel. "Plus, the central location and the lower cost of living and doing business in Kansas City would reduce the financial burden of those industry participants who would need to travel to Kansas City for the meetings," Mr. Carson stated.
"At the very minimum, the NAIC should at least consider reducing the number of meetings and streamlining the meeting agendas by eliminating items that can be effectively addressed through conference calls," he said.
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