NAIC Statement of Intent
Statement of Intent: The Future of Insurance Regulation
Our primary goal is to protect insurance consumers, which we must do proactively and aggressively. We also recognize that consumers as well as companies are well served by efficient, market-oriented regulation of the business of insurance.
Insurance is unique in the world of financial services. Historically, insurance markets have developed from state to state reflecting the differences in population, geography, weather patterns and delivery systems. State regulation has addressed that marketplace efficiently and effectively.
Fueled by enhanced technology and globalization, the world financial markets are undergoing rapid changes. In order to protect and serve more sophisticated but also more exposed insurance consumers of the future, insurance regulators are committed to modernize insurance regulation to meet the realities of an increasingly dynamic, and internationally competitive financial services marketplace. This will include working with all parties to combat and reduce the incidence of fraud, thereby providing a safer environment for consumers and lower costs.
We pledge to work cooperatively with all our partners governors, state legislators, federal officials, consumers, companies, agents and other interested parties to facilitate and enhance this new and evolving marketplace as we begin the 21st Century.
- Implementing the Gramm-Leach-Bliley
Proposed Amendments of State Laws
Working with our governors and state legislators, we will undertake a thorough review of our respective state laws to determine needed regulatory or statutory changes to achieve functional regulation as contemplated by the Gramm-Leach-Bliley Act. Anti-affiliation statutes, licensure laws, demutualization statutes, and various essential consumer protections, including sales and privacy provisions, will be part of this review. We will move forward quickly to both promulgate regulations and suggest statutory changes to facilitate implementation of the new law.
Streamlined Licensing for Producers
We are committed to uniformity in producer licensing and will work to implement effective uniform producer licensing standards. As a necessary interim step, the NAIC adopted the Producer Licensing Model Act for consideration by state legislatures. This Model Act provides specific multi-state reciprocity provisions to comply with the requirements of the Gramm-Leach-Bliley Act.
While reciprocity is a short-term answer, uniformity is the efficient, long-term solution. As a result, we have empowered the NAICs non-profit affiliate Insurance Regulatory Information Network (IRIN) to develop recommendations for a streamlined, national producer licensing process that will reduce the cost and complexity of regulatory compliance related to the current multi-state process. We believe that by leveraging work already done on the Producer Database and the Producer Information Network and by using IRIN as a central clearinghouse for non-resident licensing information, efficiencies will be realized that exceed expectations outlined in the National Association of Registered Agents and Brokers (NARAB) provisions of the Gramm-Leach-Bliley Act.
Financial Examinations and Reviews of National Companies
We will consider the implications of the Gramm-Leach-Bliley Act on the regulatory authority, focus, and procedures provided by the NAIC Insurance Holding Company System Model Act and accompanying Model Regulation and will recommend changes for consistency with the functional regulatory scheme set forth in the Gramm-Leach-Bliley Act and related federal regulations.
Building on initiatives already underway, we will review our financial reporting and financial analysis and examination processes in light of the new law and changes occurring in the market place. We will refine our risk-based approach to examining the insurance operations of financial holding companies to place greater emphasis on a companys unique risk exposures and how it manages those risks.
We will recommend mechanisms to enhance communication and coordination among all functional regulators, and we will review the role of the NAIC resources in supporting such communication and coordination.
We will pursue development of a group-wide approach to regulating insurer groups and enhancing coordination among states. As a part of this initiative, we will consider consolidated financial statements for the insurance operations of groups.
Implementing Functional Regulation and Sharing Regulatory Information
We will continue to use the NAIC process for the development of model agreements, and we will build on our progress to date. We will actively encourage the execution of information sharing agreements between the individual states and each of the key federal functional regulators.
In addition, we will develop a comprehensive agreement for the sharing of information among states.
The NAIC adoption of the model confidentiality law provisions demonstrates its commitment to break down barriers to sharing information between the States. We will work with state legislators to support such confidentiality legislation. We will pledge to form coalitions with interested parties to promote uniform and consistent enactment of the confidentiality provisions.
- Year 2000 National
"Speed to Market"
Working with our governors and state legislators, we will take steps to improve speed to market for insurance products. This will include development and implementation of a system of deference to the state of domicile using one-stop filing for products issued on a multi-state basis, where appropriate. To support this system, we will develop and implement state-based uniform standards for policy form and rate filings for appropriate product lines. In pursuing this evaluation, we will keep in mind the need for flexibility to allow local treatment of conditions produced by local markets. For lines that do not lend themselves to uniform standards, we are committed to reviewing market barriers for further efficiencies. We will take steps to shift the focus of states away from a prior approval system, where appropriate. We will also develop an e-repository for filings, a system for tracking data, and a state certification process.
The benefits of uniform regulatory procedures for insurers selling products to large, sophisticated commercial policyholders are compelling. Many states have adopted and are implementing laws to re-engineer their commercial lines regulatory functions.
We will evaluate the progress of specific states with respect to commercial lines reform, and compare those actions with the Property and Casualty Model Rate and Policy Form Law. Based on this evaluation, we will consider amending the Model and taking other appropriate steps to achieve greater uniformity and consistent application of rate and form requirements with our members.
We will continue to explore avenues to reduce unnecessary requirements for policies sold to insurance purchasers with insurance knowledge and market power. Where appropriate, we will explore increased reliance on the benefits of open competition.
Market Conduct Reform
Market conduct is an essential regulatory tool. Its importance to regulators, producers and consumers will increase as the "Speed to Market" reforms are implemented and the marketplace evolves.
We will examine the current focus, structure and implementation of market conduct programs in the states to identify the issues and concerns that currently exist in this area. This examination will help us determine the merits of voluntary uniform national standards as a basis for market conduct examinations and enforcement actions. In pursuing this evaluation, we will keep in mind the need for flexibility to allow local treatment of conditions produced by local markets.
Facilitating Electronic Commerce that Protects Consumers
The insurance-buying public and industry must be allowed to benefit from the broad range of opportunities that e-commerce offers. As a result, we adopted the recommendations of the Electronic Commerce and Regulation Working Group and endorsed the Uniform Electronic Transactions Act (UETA) for consideration and enactment in each of the states. As e-commerce evolves, we will continue to identify necessary reforms that will facilitate e-commerce while maintaining important consumer protections.
Treatment of National Insurance Companies
We are committed to exploring all options that could offer greater uniformity within the state-based system of insurance regulation.
An initial step toward this streamlined system is already available through the Accelerated Licensure Evaluation and Review Techniques (ALERT) program, which is a streamlined insurer licensing procedure. We will encourage all states to join ALERT and initiate use of the newly developed expansion application process. This will allow streamlined admissions for those companies already admitted in one ALERT state simply through the filing of an expansion application in another ALERT state. The expansion application process introduces elements of reciprocal reliance on the more detailed work of the state reviewing the complete application. We will pursue development of an e-repository for company applications to facilitate one-stop filing.
In addition, we will evaluate the broad range of regulatory issues and concerns and develop a proposal for a state-based system that could provide the same efficiencies as a federal charter for insurance companies.