SERFF Users At NAIC Meeting Fume Over I-File

I-File advocates insisted at the National Association of Insurance Commissioners' meeting in New York that I-File poses no threat to SERFF and that I-File will actually help SERFF in achieving a uniform product approval system.

Industry filings using SERFF, which stands for System for Electronic Rate and Form Filing, have risen significantly in recent years.

The NAIC?which first introduced SERFF in 1998?reported at its spring meeting that 10,118 industrial filings were recorded in February 2004, the first time the monthly-filing figure has gone above 10,000.

For full-year 2003, more than 76,000 filings were channeled through SERFF, which is nearly a 300 percent increase over filings made in 2002. The NAIC anticipates between 140,000 and 150,000 filings in 2004.

But industry representatives, especially those who have invested time and money in SERFF, said at the NAIC industry liaison committee session that they were alarmed by I-File. The representatives pointed out that Florida, California and Texas?whom they labeled "a splinter group"?have now signed a memorandum of understanding to test the life interstate compact through I-File, an e-filing system that Florida developed and now mandates that insurers in all lines use.

Some insurers, in both p-c and life segments, say they have committed resources in SERFF and are anxious at the prospect of dealing with two systems that are still largely incompatible.

"Those of us who have been with SERFF from the beginning, committed financials and people-hours, feel a disconnect in terms of our ability to understand why we are reinventing another wheel," Sonja Larkin-Thorne, a SERFF board member and an industry representative from The Hartford Financial Services Group Inc. in Hartford, Conn., said at the NAIC industry liaison committee session.

Ms. Larkin-Thorne questioned why there needs to be I-file and SERFF when NAIC itself has committed significant dollars on SERFF.

"We all know there has always been a disconnect between what the industry wants and what the regulators want?but here you have something really beautiful: that is, we came together and we agreed and committed to it," Ms. Larkin-Thorne said. "In 2004, we are going to see more than 100,000 SERFF filings."

So now, it's very difficult, she told regulators, for industry participants like her to understand the need for another system. She said the introduction of I-File means "I have to have people at Hartford who would run the training not just for SERFF, but also for I-Filing."

NAIC officials said the organization will soon work on developing a bridge program for I-File and SERFF to "talk to each other," so that product filings using SERFF in one state could be easily converted into I-File in another state. "What NAIC is doing now is writing up a proposal to see how much money it would cost," said John Lamperez, sales manager at NAIC, who has been working on SERFF implementation.

Jose Montemayor, insurance commissioner for Texas?one of the states testing the interstate compact through I-File?assured industry representatives that he is not turning his back on SERFF.

"We remain extremely committed to SERFF; we participate on it today. We continue to implement SERFF," Mr. Montemayor said at the committee session.

However, on the life side, Mr. Montemayor said, he came to the realization that three states?California, Texas and Florida?are similarly situated and that it was beneficial to harmonize rules and get a common standard among them.

"This gave us a way to get to speed-to-market this quarter, as opposed to three or four years from now," Mr. Montemayor explained. "This gave us a quick access to jump start on the interstate compact system. SERFF and I-Filing should soon be completely compatible."

Lenore Marema, vice president of industry and regulatory affairs at the Des Plaines, Ill.-based Property Casualty Insurers Association of America, who has examined both systems, told National Underwriter that smaller insurers may well prefer I-File over SERFF. "I would say SERFF is probably the Taj Mahal of electronic rate-and-form filing, while I-file takes a no-frills approach?a smaller company may well like I-File a lot better, while a large company may prefer SERFF because a large insurer may do a lot of filings."

Ms. Marema noted also that NAIC will soon work on creating an interface so that company filers can pick the system that works best for them. "If it does turn out that you can interface seamlessly between the two systems, so that there are different vendors and different ways to use them, that's better for the industry," she said. "Any e-filing system ought to be voluntary, and the interface between them is important."

She also remarked that for SERFF to gain a wider acceptance in the industry, an application program interface?also called API?needs to be extended to the industry's back offices as well.

One of the main reasons that many companies still don't use SERFF is that it doesn't interface seamlessly with their back-office systems the way it does for state regulators, for whom the API has been rolled out.

Developing an industry API has been on the SERFF agenda for some time, and it now seems that SERFF has the clear incentive to get it done, according to Ms. Marema.

"All states accept SERFF filings, but they don't accept all lines?so even if you file through SERFF, you still have to do some through paper. Overall, SERFF isn't that good of a deal. You also have to do interface with the company's back office. A lot more companies will use SERFF once it's automatically hooked up through API to their back offices," she said.