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Modernizing State Insurance Regulation

Functional regulation of insurance at the state level is the best system to protect the needs of all of us who are insurance consumers....
June 10, 2003

A Legacy of Consistency, Efficiency & Trust

By Mike Pickens
President
National Association of Insurance Commissioners

Functional regulation of insurance at the state level is the best system to protect the needs of all of us who are insurance consumers. Insurance consumers all want the same things. We want the opportunity to buy competitively priced insurance products from insurers that are financially sound, that keep their promises, and treat us fairly. These simple consumer expectations form the cornerstone of insurance regulation. The insurance regulator's job is to work to ensure that the insurers operating within our jurisdiction meet basic solvency requirements and engage in market practices that treat consumers fairly and in accordance with applicable laws.

For some 150 years, the state insurance regulatory system has served insurance consumers well by establishing a legacy of consistency, efficiency and trust. This state-based system is a unique system ideally suited for the insurance industry's unique and vital product offerings. The strength of the state-based system lies in its ability to respond to consumers, to adapt to local market issues, and to enable states to experiment and learn from one another. State insurance regulators become experts on the issues they face. Regulators freely share this expertise, enabling other regulators to learn from their experiences. In this way, the state-based regulatory system continuously evolves to meet new challenges.

Since the passage of the Gramm-Leach-Bliley Act (GLBA) in November 1999, there has been increased congressional scrutiny and pressure to modernize the state-based system. This pressure has been a decidedly positive challenge, which state regulators have accepted. The passage of GLBA in 1999 and the NAIC's work in implementing its provisions has cast a spotlight on the concept of functional regulation. Some believe the states are not up to the challenges GLBA presents for us. So far, state insurance regulators have proved these detractors to be wrong. NAIC members have recognized the competitive challenges facing the insurance industry and the need for regulation to be more efficient, more effective, less costly and less burdensome.

In March 2000, the NAIC adopted the Statement of Intent: The Future of Insurance Regulation, a vision for streamlining state insurance regulation. This vision called for making the state insurance regulatory system even more efficient and responsive to current market conditions than it has been, while continuing its long tradition of strong consumer protection. In 2001, refining this vision, the NAIC mapped out and began to implement important specific reforms. In 2002 state insurance regulators met and far exceeded the GLBA licensing reciprocity requirement. One of the most significant accomplishments of 2002 was the NAIC membership's adoption of an Interstate Insurance Product Regulation Compact. This compact will serve as the state-based vehicle to product uniformity. Working together as a team, in 2003 we intend to move state regulation even farther down the road of reform.

Implementing these changes will require state insurance regulators to partner with governors, state legislators, consumer groups, the insurance industry, and other interested parties. State regulators want to bring the voices of consumers, state legislators, business and industry leaders together for the purpose of educating members of Congress on the benefits and advantages of state insurance regulation and our concerns about the federal charter proposals. The Alliance for Sound State Uniform Regulatory Efficiency, or "ASSURE," is a national, state-based coalition formed specifically for this purpose. ASSURE is a grassroots organization comprised of the supporters of state regulation in each of our states. The ASSURE coalition currently has 15 member states: Alabama, Arkansas, Florida, Illinois, Iowa, Louisiana, Michigan, Missouri, North Carolina, Oklahoma, Oregon, South Carolina, South Dakota, Utah and Washington. Each state has its own managing board made up of two co-chairs and a steering committee. ASSURE membership is free, and ASSURE will only advocate on behalf of state insurance regulation. If you would like to become a member, please contact your state insurance regulator.

Mike Pickens is Arkansas Commissioner of Insurance and the President of the National Association of Insurance Commissioners (NAIC).

This article originally appeared in the June 2003 PIA Connection.