NAIC To Develop Federal Bill To Help Standardize Insurance Regulation

One proposal was detailed by Texas Insurance Commissioner Michael Geeslin during the government relations leadership council session here at the NAIC's quarterly meeting. He discussed the idea of developing a model called the "Federal Standardization Act of 2008″ in the coming year as a way to homogenize insurance regulation.

Currently, he explained, insurance is being looked at by different federal authorities, adding that more standardization is needed.

A single convention or organization could be developed to determine items to be standardized that could range from oversight of products to licensing, he said.

That organization could be the NAIC or another body, Mr. Geeslin added. It could conceivably incorporate the Compact Commission, which is currently approving product filings for life insurance products, he noted.

The Compact Commission was an effort advanced by the NAIC and became fully operational a year ago. Mr. Geeslin said details still would need to be worked out, but development could begin by the back end of 2008.

What this would offer, Mr. Geeslin explained, is putting efforts on a "clock" or timetable, and "giving ownership to the task of standardization." The proposal would include lines of business where there would be a fair certainty of success in standardization, he added.

Meanwhile, the NAIC was urged by state legislators, insurers and consumer advocates to make their process more open to the public. For example, at a session here of the NAIC's Industry Liaison Committee, insurers called for greater transparency in the way the group develops testimony for Congressional hearings.

Their comments followed another NAIC liaison meeting, this one with consumer representatives, who recommended that commissioners pursue a policy of open meetings to ensure better participation when policy issues are being developed.

Deidre Manna, a representative with the Property Casualty Insurers Association of America, noted an NAIC estimate that the organization testifies on insurance issues before Congress from 30-to-50 times a year.

She asked if the NAIC has a process for approving the positions it takes during testimony. "If there is one that is more formalized, we'd be interested in hearing about it," she said. "But if that is not what is taking place, we'd like to urge you to formalize [the process]."

Marsha Harrison, representing the National Association of Mutual Insurance Companies, said there are three types of NAIC activity that concern industry members. The first, she said, occurs when NAIC Congressional testimony is in conflict with what working groups and committees are doing.

A second case, according to Ms. Harrison, is when a single commissioner speaks their individual views but NAIC publicity makes it appear as if the testimony represents the whole organization. "The fact that a person is testifying on his own is lost in the translation," she said.

A third situation, she added, is when a news release praises an act in Congress when the NAIC has not adopted a position, citing the Klein-Mahoney Homeowners Defense Act on catastrophe funding.

"The threshold question is, what is the process, and is it tracking with what NAIC working groups are doing?" said Dave Snyder, a representative with the American Insurance Association. "Secondly, if there is diversity [of opinion] in the regulatory community, how can that be expressed?"

Illinois Insurance Director Michael McRaith, who chairs the industry liaison committee, said e-mails are exchanged and there is a discussion among members so that commissioners have a chance to look at testimony. Then it is used, he said.

But Ohio Insurance Director Mary Jo Hudson disagreed, using the Homeowners Defense Act as an example. "There is a very involved process for [developing] model laws, but where there are divergent views, it appears the NAIC as a whole had a position where only certain parts of the NAIC [were considered]. It was a done deal by the time it was circulated."

Ms. Hudson said that on a number of occasions an NAIC position has not reflected her state's stance on the issue.

Mr. McRaith, in response, said the Homeowners Defense Act had been the subject of a briefing and PowerPoint presentation by U.S. Rep. Tim Mahoney, D-Fla., at the NAIC fall meeting, and it was discussed by the NAIC property-casualty "C" committee–thus the NAIC's position should not have been a surprise.

The issue of greater public access to all NAIC meeting sessions was raised during the consumer liaison meeting by three consumer representatives.

Calling for a new policy on open meetings were Indiana's former insurance commissioner, Sally McCarty (now insurance and advocacy specialist with Hemophilia of Indiana); Don Morrison, executive director with the North Dakota Center for the Public Good; and Brendan Bridgeland, director with the Center for Insurance Research.

What is "particularly disturbing," according to Ms. McCarty, is the lack of openness in the model law process, which she characterized as the NAIC's "most important product."

Mr. Bridgeland recognized that there are legitimate reasons to close meetings when there are solvency discussions for individual companies that could cause a "run on the bank situation." However, he continued, it is important to have tight guidelines and avoid new names, such as "regulator-to-regulator," for meetings that are still closed.

"It is important that there be policy deliberation," he said, adding that he doesn't believe "pure policy matters warrant secrecy."

During the session, consumer advocates invited the head of the National Conference of Insurance Legislators to offer his views on open meetings.

NCOIL's new president, Rhode Island State Rep. Brian Kennedy, D-Hopkinton, last April raised the issue of open sessions, and worked with the NAIC to establish a legislative liaison committee.

Rep. Kennedy noted that progress had been made, but that there would be over four months until the next NAIC quarterly meeting–sufficient time to restructure meetings so that they could be open and closed at the end of sessions, if company issues were raised.