Now that state regulators are warming up to the idea of establishing a federal Office of Insurance Information within the Treasury Department, designed to keep the executive branch informed and coordinate international trade issues, why not just appoint the National Association of Insurance Commissioners to do the job?
Indeed, rather than waste time and money creating a new federal bureaucracy, recruiting qualified staff and establishing a working relationship with state insurance departments, wouldn't it make more sense to simply tap the NAIC to fill the role envisioned in HR 5840--the Insurance Information Act?
Congress could grant the NAIC a federal charter (wouldn't THAT be ironic!), outlining their powers and responsibilities to coordinate national insurance policy and work with Uncle Sam on global trade and regulatory issues.
After all, the NAIC already knows the drill! They have a standard operating procedure to coordinate national regulatory policy, create model laws and deal with multinational issues. They have the people, the expertise and the infrastructure to hit the ground running.
Besides, if Congress decides to reinvent the wheel with its Office of Insurance Information, a clash is inevitable with the NAIC (despite the fact that, as part of the legislation, the NAIC will play a primary role in an advisory group set up to work with the new federal agency). Turf battles are also likely with individual state insurance departments.
Indeed, bad feelings would probably be generated right away, as it's likely the new federal agency will have to strip key personnel from the NAIC and state insurance departments to fill out its own staff. (If they don't follow that path, it means they'll be hiring people not necessarily familiar with insurance regulation, making the transition that much more difficult for everyone.)
Empowering the NAIC to act as the federal government's official liaison with state insurance departments might also eliminate many of the problems plaguing state regulation, if the federal appointment would increase the association's leverage in getting model laws widely approved.
This might also head off the need for an optional federal charter down the road, if Congress approves companion legislation setting up a national licensing system for insurers and intermediaries, along with its bill to set standards for oversight of surplus lines and reinsurance.
There you go! Problem solved!
Well, not so fast, some will say!
For one, critics will contend, the NAIC currently does a lousy job keeping state regulators on the same page. In addition, its policy formulation process is glacial, and its bureaucratic infrastructure Byzantine.
At a hearing earlier this week on HR 5840 before the House Financial Services Subcommittee on Capital Markets, Insurance and Government Sponsored Enterprises (I say pass a bill calling for shorter subcommittee names!)--during which the NAIC voiced its qualified support for the bill (click here for the full story), objections to having the NAIC as a key player at the new federal office were raised by state legislators.
Rhode Island State Representative Brian Kennedy, D-Hopkinton, testifying on behalf of the National Conference of Insurance Legislators, said that “while acknowledging the NAIC is a repository for insurance information, NCOIL believes that giving such a primary role to the NAIC in the OII Advisory Group allows the tail to wag the dog.”
Mr. Kennedy, who is NCOIL's president, also quoted the words of past NAIC president, Alabama Commissioner Walter Bell, in noting that the NAIC is not a governmental body and has no regulatory authority.
Should the bill be enacted as drafted, he told the committee, “this would be a dramatic enhancement of the authority for this nongovernmental entity known as the NAIC, which comes at the expense of the state officials to whom they are accountable.”
These are all good points, but before rushing off to create an entirely new entity, working through a reformed and revitalized NAIC is an idea worth exploring.
What do you folks think?
Comments (7)
For years, there's been lots of talk, but little action. Now there's lots of talk about finally taking action. And what action do we take? Federalize insurance.
Yes, let's put the body (Congress) that has the lowest approval rating on the planet, and that has pretty much no clue what it's like to be an average citizen, an average consumer, or an average anything in charge of insurance.
Perhaps they could pack the bill that creates this agency with more, much needed pork. We could even attach a national health care act of some type to it.
To really make it appealing, let's give Congress the NAIC, and let the NAIC be the Federal Department of Insurance. Then you would have several hundred clueless politicians and more than 50 bureaucrats that--as you said--move at glacial speed in charge of insurance.
And while we're at it, we might as well globalize things. Why not invite representatives from one or two foreign insurance regulatory bodies to be a part of the federal insurance regulatory process?
And since they and their products are at a distinct disadvantage in the U.S., let's give them more power and more say in how insurance is done in this country so they don't feel discriminated against.
I don't think it's a good idea to let Congress or the NAIC manage insurance right now. Both bodies are too busy mismanaging their current responsibilities to add more items to their already cracked plate.
Posted by Gary Wolcott | June 12, 2008 5:22 PM
Posted on June 12, 2008 17:22
I am speechless. I can't even believe you would suggest that.
There is so much wrong with that from a consumer point of view that I don't know where to begin.
The NAIC is part of the existing problem, and has had their chance. A better idea would be to split up the NAIC as follows:
Keep the N for "National" insurance regulation, end the revolving door of "Association" with ex- and future insurance industry personnel, and lastly, fire all of the ICs that are not publicly elected.
Yeah, I know, if we did that, "It would only raise the cost of insurance for everybody." Right?
Posted by Insured Consumer | June 13, 2008 8:54 AM
Posted on June 13, 2008 08:54
Sam:
You know my view from times past......The NAIC is a trade association....Its future is irrelevant concerning how to get the USA synched into the global marketplace for "insurance"!
A federal presence is necessary in order to deal with anything outside our borders as well as "interstate."
Posted by Wayne Salen | June 13, 2008 12:20 PM
Posted on June 13, 2008 12:20
Your suggestion would make sense, Sam, if NAIC had demonstrated an ability to achieve uniform and universal processes between the states. They've had the opportunity for more than 100 years to find commonality where it makes sense to do so. Of course, if they had been successful there would be no rumbling about federal intervention.
Even under the current threat of federal regulation, the NAIC hasn't exhibited that they can find solutions to the problems that have stirred the pot in Washington to quiet the clamor by the feds to play further in the insurance sandbox.
I can't wait to see a new federal insurance bureaucracy throw its weight around. Can it be possible that a federal agency would be able to achieve solutions?
Why do I feel this is a serious waste of time, energy and taxpayer money AGAIN! Here we go...Status quo, "situation normal...".
Posted by Joan | June 13, 2008 12:34 PM
Posted on June 13, 2008 12:34
If we're stuck with federal intervention into insurance regulation, what could make more sense than giving the NAIC a federal charter?
What would be wrong with a federal regulatory agency whose governing board is composed of officials either elected or appointed by the states where and to whom they are responsible for regulating industry behavior?
Glacial? Clueless? Politized? Industry or consumer biased? Bureaucratic? What federal regulatory body hasn't been accused? Which one hasn't been at least occassionally guilty?
No offense to anyone intended, but I'd postulate that for a voluntary, consensus governed organization with ZERO legal authority, the NAIC has, in many ways, actually done pretty well.
Who knows what might happen it was actually given a tooth or two?
Posted by John Ference | June 13, 2008 1:55 PM
Posted on June 13, 2008 13:55
Your suggestion might have some legitimacy if there was a record of success that could be demonstrated. Instead, on issues with an international or multi-state component, there is analysis paralysis.
Hooray for N.Y. Insurance Superintendent Dinallo for moving forward on the non-admitted reinsurance collateral issue the NAIC has been studying for years.
SAM RESPONDS:
I hear you, Terry! But my thought is that with a federal charter behind it, the NAIC might have a lot more leverage to get things done than they do now.
Posted by Terry Fleming | July 3, 2008 10:12 AM
Posted on July 3, 2008 10:12
I enjoyed the posting. Your opinion makes sense in granting the NAIC a federal charter.
If Congress did reinvent the wheel, it would no longer be round.
Posted by Ohio Agent | July 13, 2008 10:33 AM
Posted on July 13, 2008 10:33