Arkansas Insurance Commissioner Mike Pickens told members of the House Subcommittee on Capital Markets, Insurance and Government Sponsored Enterprises that regulating the business of insurance is a function of the states, where it has served consumers effectively and efficiently for 125 years—and where it should remain for the next 125 years.
According to the National Association of Insurance Commissioners Pickens, NAIC’s president, presented the group’s recently adopted action plan, “A Reinforced Commitment: Insurance Regulatory Modernization Action Plan,” as the blueprint for the future of state insurance regulation.
“The state regulatory system is inherently strong when it comes to protecting consumers because we understand local needs and local market conditions,” he said. “However, we agree with critics that there is a need to make the system more uniform, reciprocal, and efficient. The states are well underway in our efforts to modernize state regulation where improvements are needed, while preserving the benefits of local consumer protection that is the real strength of state insurance regulation.”
Unanimously adopted by its members at the 2003 NAIC Fall National Meeting, the plan sets forth comprehensive, time-sensitive principles and goals that address consumer protection, market regulation, “speed-to-market” for insurance products, producer licensing, insurance company licensing, solvency regulation, and change in insurance company control. It calls for states to reach all key modernization goals by dates ranging from Dec. 31, 2003 to Dec.31, 2008.
“State regulators are on time and on target to accomplish changes needed to establish an efficient national system of insurance regulation in the United States,” Pickens said.
In recent years, certain members of Congress have proposed creation of a federal insurance regulator, much like that of the banking and securities industries. Federal oversight, though, is not what insurers and consumers want or need, explained Pickens.
“Ultimately, a federal charter and its regulatory system would result in at least two separate insurance systems operating in each state,” he said. “One would be the current department of insurance, established and operated under state law and government supervision. The second would be a new federal regulator with zero experience or grounding in the local state laws that control the content of insurance policies, claims procedures, contracts, and legal rights of citizens in tort litigation.”
Pickens also pointed out that federal oversight is unnecessary, given recent accomplishments by state regulators. For example: 49 states have now adopted the NAIC’s Producer Licensing Model Act; 39 states have implemented state licensing reciprocity; a System for Electronic Rate and Form Filing (SERFF) has been created, which has resulted in an 88 percent increase in electronic filings in 2003 over 2002, with an average turnaround time nationally of only 17 days; and, regarding market conduct, 42 states currently certify compliance with two or more critical insurance company exam areas, such as scheduling, pre-exam planning, company procedures and reports.
The NAIC is supported in its modernization initiatives by the National Conference of State Legislatures, the National Conference of Insurance Legislators, and the Council of State Governments.
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