NAIC Scored Over Model Law Adoption Procedure

Consumer groups are urging the National Association of Insurance Commissioners to rethink its new policy for adopting model laws.

In a letter dated Sept. 10, four consumer representatives, who are given funding to attend NAIC meetings, detailed why they think the procedure, announced last spring, is not in the best interests of consumers or the NAIC.

The new policy requires two-thirds of commissioners to vote for a model and a commitment on the part of commissioners to get the model adopted in their states.

The consumer representatives' letter is signed by Brendan Bridgeland, executive director of the Center for Insurance Research, Cambridge, Mass.; Birny Birnbaum, executive director of the Center for Economic Justice, Austin, Texas; Mila Kofman, associate research professor with the Health Policy Institute at Georgetown University, Washington; and Bill Newton, executive director of the Florida Consumer Action Network, Tampa, Fla.

Their letter noted there was no public discussion over the change in policy and said the new model law procedures “continue to wreak havoc at the working group and committee level.”

It asks NAIC leadership, including NAIC President Walter Bell, why procedures were changed and why these changes were done in executive session without public input.

Mr. Bell, who is also Alabama insurance commissioner, has emphasized that the new policy will create standards that are more uniform across states as well as require greater commitment from commissioners who vote for a model at the NAIC's executive committee and plenary session.

The consumer groups' letter goes on to note that “despite the NAIC routinely presenting itself as an organization of public officials–either in letters and testimony to Congress and governors or through agreements with public officials of other countries–the NAIC operates like a private organization without the public records or public meeting requirements that apply to its individual members.”

In addition, the letter said “the fact that a model law is not adopted by a majority of the states does not mean the model law has not affected policy development in the states.”

In fact, it went on to say “many NAIC models establish standards for consumer protection that are influential in state legislative development.”

The letter also asked the NAIC leadership why adoption by a majority of states would be the only criteria used to measure success. It suggested that model laws can be part of advocacy in the legislative development process.

The consumer advocates urged that the NAIC policy focus on “a strong consumer protection standard” as well as eliminate “the second-class product of 'guidelines.'”

It further said the criteria for adopting model laws should be either a simple majority or the creation of a system of weighted voting based on state population.

On the issue of public policy discussion, the Center for Economic Justice's Mr. Birnbaum said that when the NAIC goes before Congress or to a foreign country to discuss insurance matters, it acts as a public policy group. However, he continued, when it comes to creating open records, it counters that it does not have to reveal such information because it is a private organization.

He asked why the organization does not file an IRS 990 form, an annual return that provides information including financials, like other nonprofit organizations. NAIC has nonprofit status but has a budget of over $50 million, according to Mr. Birnbaum.

Mr. Birnbaum also noted concerns regarding former NAIC presidents and high-profile commissioners leaving their posts in order to accept positions in the industry or positions as lobbyists.

On the issue of distinguishing between guidelines and model laws, Mr. Birnbaum said that under the new policy, “it becomes clear that guidelines become meaningless.”

In addition to the current criticism by consumer groups, the NAIC's policy of barring the public from some sessions has come under fire within the past year from lawmakers with the National Conference of Insurance Legislators.