The National Conference of Insurance Legislators delivered a one-two punch to the National Association of Insurance Commissioners last week, accusing state regulators of overstepping their bounds on the issues of meeting secrecy and accreditation standards.
In a letter to his NAIC counterpart, NCOIL President and Michigan State Sen. Alan Sanborn, R-Richmond, wrote that NCOIL "believes that the manner in which models are chosen as accreditation standards has been subtly degraded over the years–and perhaps, in a manner of speaking, when no one was looking."
NCOIL has specifically objected to the recent passage of the Insurance Receiver Model Act and amendments to the Model Audit Rule as examples of regulators exceeding their roles in setting state insurance law.
Accreditation, hailed in some quarters as the savior of state regulation following a series of insolvencies and threats of federal oversight, has been something of a sore point between the two groups since the concept was established more than a decade ago. The accreditation program sets hurdles that state lawmakers must clear to meet NAIC national regulatory standards.
"Much has changed, yet much has remained the same," Mr. Sanborn wrote. "The unraveling of what legislators have maintained is meaningful is evident."
Mr. Sanborn quoted NAIC President Walter Bell as telling him that the actual process for a law to become an accreditation standard is five years–a point the NCOIL chief disputes.
"When all is said and done, the NAIC program really leaves states one year to expose the model after NAIC deems the model or revision to a model a potential accreditation standard," Mr. Sanborn wrote.
Adoption by several states of an insolvency law that contradicts the national NAIC model will only add fuel to this fire, along with the fact that the joint NAIC-NCOIL market conduct model–once thought of as a possible accreditation standard–found no takers in the statehouses.
The NAIC told National Underwriter that it had no comment about NCOIL's letter regarding accreditation.
Meanwhile, the issue of secrecy has always been an undercurrent in criticism of the NAIC's decision-making process.
In a letter to Mr. Bell, who serves as Alabama's insurance commissioner, NCOIL Vice President Brian Kennedy said the group is "abusing the use and purpose of executive sessions."
In addition, he believes the NAIC's assertion that it has no regulatory authority–and therefore is exempt from so-called "sunshine" laws guaranteeing public access to policymaking meetings–calls into question accreditation standards that have virtually become state law.
Mr. Kennedy, a Democratic state representative from Hopkinton, R.I., disputed Mr. Bell's contention that regulators, when meeting under the guise of the NAIC, are not required to follow their state's open meeting requirements.
"Your oath of office and rules of conduct do not cease when you cross state geographical boundaries into another jurisdiction," Mr. Kennedy wrote. "No commissioner or supervisor has the right to ignore the laws of their respective state and conduct such clandestine meetings."
As for Mr. Bell's contention that the NAIC has no regulatory authority, Mr. Kennedy maintains that this jeopardizes the legitimacy of accreditation standards past and present.
In a statement issued by the NAIC, Mr. Bell did not claim any exemption from state sunshine laws, but said the group has a "liberal open meetings policy" and stood behind the right to closed sessions when required.
Mr. Kennedy did not refer to any specific instances in his letter, but noted that on numerous occasions when he attended NAIC meetings representing NCOIL, the public was either ushered out in the middle of the session or not allowed in at all.
NCOIL's criticism struck a chord with industry and consumer representatives.
David Snyder, assistant general counsel for the American Insurance Association, said NAIC commissioners should follow the most liberal of any state open meeting laws when conducting its business.
Mr. Snyder agreed with Mr. Kennedy that state regulators meeting to determine national regulatory policy cannot ignore the laws of their respective states and conduct clandestine meetings.
He specifically cited the closing of the NAIC Government Affairs Committee, which deals with federal legislative issues, as one violation of good policy.
"I don't think there is any allowance for discussion of legislative strategy as a reason to close a meeting in state law," he said.
Birny Birnbaum, director of the Austin, Texas-based Center of Economic Justice and a funded consumer representative at the NAIC's quarterly national meetings, said the regulator group wants to have it both ways.
"When it testifies before Congress or submits amicus briefs to courts, it presents itself as [a group of] government officials," Mr. Birnbaum said. But when asked to act like a government agency in terms of open meetings and accountability, it claims to be a nonprofit organization, he added.
Given the fact that many NAIC work products are referenced in state laws, "it is clear that the NAIC should be conducting its business like a government agency, subject to open meetings and full accountability," Mr. Birnbaum asserted.
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