NAIC Unveils Reform Roadmap

The framework addresses 15 areas targeted for modernization, including market conduct uniform standards, company and agency licensing, as well as commercial and personal lines insurance.

Insurers said that offering a roadmap is a good first step, but that the framework needs much more in the way of details.

NAIC President and South Carolina Insurance Director Ernst Csiszar said that this is an evolving document and that details will be incorporated as the process develops.

Mr. Csiszar said that even if a bill addressing insurance reform does not advance in the few remaining days of the current Congressional session, the issue is going to come up again. Consequently, he said, regulators have to develop a plan to respond to a request by House Financial Services Committee Chairman Michael Oxley, R-Ohio, to assist the committee in modernizing state insurance regulation.

Points he made on the model include the importance of being able to access FBI fingerprints to advance uniformity of producer licensing and the possibility of making the market conduct process an accreditation standard at some point.

The NAIC needs to continue to be engaged with Congress, according to Jim Poolman, NAICs vice president and North Dakotas insurance commissioner. He added that a market conduct accreditation process is a reasonable goal since NAICs financial accreditation process has worked so well.

The roadmap states that market conduct uniform standards are based on preliminary elements, including:

Centralized data collection.

Structured and uniform market analysis.

Uniform examination procedures.

Interstate collaboration.

Work is underway, according to the roadmap, to streamline company licensing through the NAICs ALERT system, and producer licensing through a central electronic licensing system based on 100 percent reciprocity if states have direct access to FBI fingerprint data and if they can share information on a confidential basis.

For commercial lines, the NAIC would establish a use-and-file system for rates and rating systems, and a file-and-use system for policy forms with a 30-day waiting period. In addition, a states policy form requirements would apply only to insurance written for individual commercial risks in the state.

The frameworks handling of personal lines includes a filing review standards checklist and recognition that state legislatures should determine the appropriate regulatory framework.

David Snyder, a representative with the American Insurance Association in Washington, said the roadmap suggests that the momentum for reform is growing and that NAIC wants to be part of that process. But, he added, they need to use interstate highways rather than streets to get there.

There has been legislation introduced in four statesMassachusetts, Oklahoma, South Carolina and Rhode Islandto modernize regulation, such as flex rating for auto insurance, noted Robert Zeman, a representative with the Property Casualty Insurers Association of America in Des Plaines, Ill. But more reform needs to be introduced in the states, he continued, and the roadmap must better address reforms on personal lines.

Roger Schmelzer, representing the National Association of Mutual Insurance Companies in Indianapolis, said he told regulators that if reform is introduced, it must be a state-based solution.

Jim Connolly is a senior editor with NUs Life & Health edition.

Reproduced from National Underwriter Edition, June 18, 2004. Copyright 2004 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.