Today (Friday) the National Association of Insurance Commissioners (NAIC) testified before the Subcommittee on Capital Markets, Insurance, and Government Sponsored Enterprises regarding the impact of the SMART proposal on state insurance regulation. The NAIC stressed the importance of regulation that balances vigorous consumer protection with dynamic business competition to provide a healthy insurance marketplace for consumers.
“The NAIC is an organisation of state government officials who are sworn to faithfully administer the laws enacted by state legislatures and governors on behalf of citizens,” said Diane Koken, NAIC president and Pennsylvania insurance commissioner. “Protecting American consumers is our top priority. Responsive and effective consumer protection is the hallmark of state insurance regulation, a system that has worked well for 125 years.”
During the hearing, Koken testified to the progress that system is making to modernize state regulation where improvements are needed, while also preserving the benefits of consumer protection.
“The states and the NAIC are implementing a state-based action plan to achieve many of the regulatory modernization goals embodied in the draft SMART proposal. We are on-time and on-target to meet those goals and achieve legitimate changes sought by the insurance industry.”
Koken provided an update on where the states and the NAIC stand on meeting those goals, including these highlights:• Life Insurance: Where appropriate, NAIC and the states are working to achieve full regulatory uniformity to benefit both consumers and insurance providers. To accomplish this, the NAIC negotiated development of an interstate compact. The compact, adopted by 15 states so far with two others soon to follow, creates an interstate commission that will develop national product standards for several types of life insurance products.
• Speed to Market: Much progress has been made since 1999 to improve speed to market, including the success of the NAIC's System for Electronic Rate and Forum Filings and the development and implementation of filing review standards checklists.
• Company Licensing: Efforts to improve standardization and consistency in the licensing of insurers has been a priority. This year the NAIC adopted a best-practices handbook that provides for states to rely on the domiciliary state regulator when assessing the financial condition and executive management of an applicant insurer.
• Market Conduct: “The NAIC is implementing a more effective and efficient market regulatory system,” Koken testified. “It is based on five primary elements: 1) centralized data collection; 2) structured and uniform market analysis; 3) uniform examination procedures; 4) interstate collaboration; and 5) broader regulatory responses to address general business practices.” Koken mentioned progress has been made in each area.
• Producer Licensing: Currently 42 states have satisfied producer licensing reciprocity mandates in the NARAB section of the Gramm-Leach-Bliley Act. “The NAIC is also moving well beyond the Gramm-Leach-Bliley mandates in several other areas.”
“It's clear we are making progress across the board,” Koken added. “The states are committed to a continuing process of modernizing our nation's regulatory system as the marketplace continues to evolve, and to do so without sacrificing important consumer protections.” Koken asked Congress to work with the NAIC to implement the modernization initiatives through the state legislative system. Koken concluded the testimony by addressing concerns with the draft SMART proposal.
