State legislators and regulators–often at odds over just who is in charge of insurance lawmaking and how model laws are crafted–have been burying the hatchet and showing a new spirit of amity lately, driven by the possibility the federal government could soon move onto their turf.
The two sides of the same coin in state insurance oversight have not always seen eye to eye over the past year, with disputes between the National Association of Insurance Commissioners and the National Conference of Insurance Legislators arising over access to NAIC meetings, transparency in NAIC decision-making and disposition of funds flowing to the NAIC's coffers.
However, attendees here at last week's quarterly NCOIL meeting 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 state representatives and local insurance commissioners.
A theme that threaded through several of the sessions 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 demonstrating why this is so.
In fact, NCOIL adopted a resolution on March 1 opposing an optional federal charter. Before the vote, the NAIC, as well as the National Governors Association and National Conference of State Legislators, closed ranks with NCOIL to support the resolution and resist a federal takeover of insurance regulation–optional or otherwise.
NCOIL's adoption of the "Model State Resolution in Opposition to S. 40/H.R. 3200, the National Insurance Act of 2007," was unanimous.
The resolution, sponsored by NCOIL's president, Rep. Brian Kennedy, D-Hopkinton, R.I., said that an OFC would "promote ambiguity and confusion," "allow companies to opt out of state insurance regulatory oversight and evade important state consumer protections," and create a federal mechanism that "cannot by its very nature respond, as state regulation does, to states' individual and unique insurance markets and constituent concerns."
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 based here in Washington, for example, 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.
Rep. Kennedy and Sandy Praeger, Kansas insurance commissioner and NAIC president, said they had not read the report and declined comment.
However, Ms. Praeger's theme was unity with state legislators 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," she said. "Do you want to call someone in your state who understands the issues, or a 1-800 federal number?"
Rep. Kennedy said 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 Rep. Kennedy. He pointed to ideas such as one described during an 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 discuss how state regulation is more efficient, should an OFC bill be introduced in 2009 or 2010. He said the option was being looked at in Texas, and was just one of a number of possibilities being considered by the NAIC.
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 an interstate compact.
Indeed, the Interstate Insurance Product Regulation Commission was offered as an example of how state regulation can be streamlined and refined. West Virginia Insurance Commissioner Jane Cline, NAIC vice president and chair of the commission, described how the IIRPC was operating and actually receiving product filings.
In addition, New Hampshire Commissioner Roger Sevigny, the NAIC's president-elect, detailed how a task force had gone to the states to make sure they are in compliance with uniformity requirements under the federal Gramm-Leach-Bliley Act of 1999. If enough states fail to comply, the law triggers creation of a National Association of Registered Agents and Brokers to handle the task.
Mr. Sevigny said states found to be falling short of GLB mandates 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 Insurance Company he was asked to write business for an acquaintance living in Virginia.
He did not have the appropriate license to do business in the state, but because of a producer license processing system developed by the NAIC, his staff was able to get him licensed by 9 o'clock the next morning so that he could write the business.
To head off attempts to create an optional federal charter, NCOIL noted the efforts of Texas Insurance Commissioner Mike Geeslin, who outlined a plan to defend state oversight before Congress, with the following goals.
o Preservation of states' expertise and experience.
o Standardization of lines of business where feasible, realizing that it is not practical to do this for all sectors.
o Positioning the states, and thus the nation, so that the United States is not disadvantaged from a regulatory standpoint, but making sure any reforms do not come at the expense of consumers.
o Creation of a body of basic regulatory and oversight standards.
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