NAIC CEO Says State Regulatory Process Will Improve

NU Online News Service, April 3, 3:52 p.m. EDT

Actions being taken today by state insurance regulators will deal with current inefficiencies and create a more effective, state-based regulatory system, the chief executive officer of the National Association of Insurance Commissioners said.

NAIC CEO Therese M. Vaughan's comments came in a video interview with Leonard C. Brevik, National Association of Professional Insurance Agents executive vice president and CEO.

The interview was played during NAPIA's recent federal legislative summit and transcribed portions of the interview were made available by the PIA.

Ms. Vaughan said the current system protects consumers, and while not perfect, "we are there on the ground to deal with consumers. There's a lot of talk right now about global financial stability. We are there worrying about the family's financial stability, the promises companies have made and whether consumers are going to benefit from those promises."

The current system, she went on to say, is not state-based, but a "national state-based system."

"There is a tremendous amount of coordination that goes on," she continued.

"We have built a structure over the last 20 years or so that has a tremendous amount of interaction between the states. It's got a lot of peer review. It's got a lot of states advising other states. It has standards in areas that we all adhere to, [such as] uniform processes, centralized databases, centralized review processes, oversight of activities that are going on all over," said Ms. Vaughan.

The coordination that goes on today among insurance regulators benefits consumers and gives regulators the checks and balances they need to pick up problems, she advised.

Further, she said, the current system allows for the protection of consumers, and "at the same time that we have this overlay of working together to identify problems and solve problems…it helps us correct errors before they get to be too big."

She admitted that improvements still need to be made to the current system.

"It's a good system, but can we make it better," she said. "This is an opportunity to look at ways to make the state-based system function more as a highly coordinated national system," she said.

"I think if we look three-to-five years from now, we will see some changes in the relationship among the states, and I go back to the Interstate Compact … I think that's an example of the kind of thing that can be done to make this a more effective national system and deal with some of the inefficiencies we have."

Ms. Vaughan also mentioned that the NAIC is forming a Center for Insurance Policy and Research for policymakers in Washington, D.C., to access the NAIC and its insurance information more easily.

Congress is looking for solutions and "is tired of hearing people say they want an optional federal charter, [and] they're tired of hearing supporters of state-based systems say 'don't do anything, the system is fine just the way it is."

Ms. Vaughn said the NAIC will be seeking a professor on sabbatical to fill the NAIC academic position of Distinguished Scholar in Insurance Regulation. The professor will spend a year in the world of insurance regulation and "help us think through the difficult problems," she explained.