NAIC-NCOIL Love Fest For State Regulation

State lawmakers and insurance regulators, who have sometimes been at odds, have been showing a new spirit of amity lately–driven by the possibility the federal government could move onto their turf.

Attendees at the spring meeting of the National Conference of Insurance Legislators (NCOIL) here and the tempo of discussions at sessions suggest that the threat of an optional federal charter for insurers is a factor encouraging a turnaround in relations between legislators and insurance commissioners.

A theme that threaded through several of the sessions that began yesterday was how state regulation of insurance could better serve consumers than a federal regulator and how all state public officials need to work together to offer tangible proof about why this is so.

In fact, NCOIL is considering adopting a resolution opposing an optional federal charter–a decision that could be finalized on March 1.

OFC has its supporters in the insurance industry who maintain that the choice of having national regulation is an important regulatory option as insurers face global competition.

The American Council of Life Insurers and the American Insurance Association, both in Washington, support an OFC. In fact, the ACLI commissioned a just-released study by two academics, Martin Grace and Robert Klein from Georgia State University, that found the growth of insurance regulatory expenses appears to be outstripping inflation and general employment growth.

NCOIL President Rep. Brian Kennedy, D-Hopkinton, R.I., and Sandy Praeger, Kansas insurance commissioner and new president of the National Association of Insurance Commissioners, said they had not read the report and declined comment.

Ms. Praeger said, during one NCOIL session attended by all members of the NAIC leadership, “We are unified in presenting our ability to protect consumers in our states… Do you want to call someone in your state who understands the issues, or a 1-800 federal number?”

Mr. Kennedy said that he doubts there would be cost savings with a federal regulator, noting that at least in Rhode Island, cost cutting efforts are making state government lean.

He asked rhetorically if it is better to turn over insurance regulation to a federal system that would do nothing to help consumers in his state–consumers who are also his constituents.

State insurance regulators and legislators need to “head off further rhetoric about an OFC,” said Mr. Kennedy. He pointed to ideas such as one described during the afternoon NCOIL session by Texas Insurance Commissioner Mike Geeslin.

Mr. Geeslin outlined a plan that would allow state regulators and legislators to be able to go to Washington and have something to discuss about how state regulation is more efficient if an OFC bill is introduced in 2009 or 2010.

He noted during his presentation before legislators that this option was being looked at in Texas and was just one of a number of options being considered by the NAIC.

The points for discussion concerning changes in insurance regulation he presented include:

o Preservation of states' expertise and experience.

o Standardization of lines of business where practical, realizing that it is not practical to do this for all lines of business.

o Positioning the states, and thus the nation, so that the United States is not disadvantaged or faced with the possibility of starting from a “dead standstill,” but not at the expense of consumers.

o Creation of a body of standards.

In emergency situations, states would have to be able to move quickly, Mr. Geeslin noted. In order to achieve these goals, he said, states could set up a national body with a five-to-seven-year time clock similar to a compact.

Indeed, the Interstate Insurance Product Regulation Commission was offered as an example of how state regulation is being streamlined and refined now. Jane Cline, West Virginia insurance commissioner, NAIC vice president and chair of the commission, described how the IIRPC was operating and actually receiving product filings.

And Roger Sevigny, New Hampshire commissioner and NAIC president-elect, detailed how a task force had gone to states to make sure they are still in compliance with the National Association of Registered Agents and Brokers, a requirement in the Gramm-Leach-Bliley Act of 1999. If they are not, he said, a number of states are promising quick action to bring them back into compliance.

Alabama State Rep. Greg Wren, R-Montgomery, described how as an agent for Northwestern Mutual Life Ins. Co., he was asked to write business for an acquaintance living in Virginia. He did not have the appropriate license to do business in the commonwealth but, because of producer licensing processing developed by the NAIC, his staff was able to get him licensed in the commonwealth by 9 o'clock the next morning so that he could write the business.