NAMIC Says GAO Report Affirms Group’s Stance on NAIC’s Ability

The National Association of Mutual Insurance Companies (NAMIC) says a long-anticipated General Accounting Office (GAO) report on state regulatory initiatives confirms the association’s position that while state insurance regulators have accomplished a great deal, they cannot reform insurance regulation by themselves.

According to the NAMIC, the GAO report, which was requested by Congressman John Dingell, D-Mich., last year and released Aug. 6, recognized the efforts of the National Association of Insurance Commissioners (NAIC) to make state regulation less burdensome. It pointed out, however, that factors beyond the NAIC’s control greatly affect the success of those efforts.

“State legislators are the most powerful allies the NAIC can have in the struggle for state regulatory modernization,” said Roger Schmelzer, NAMIC’s vice president-regulatory affairs. “But, state legislators have to do the heavy lifting.”

The NAMIC said the report makes it clear the NAIC cannot make these regulatory changes alone. State legislatures have to approve the recommendations for reform without significant changes, and each state insurance department must successfully implement the recommendations.

“However, the NAIC, as a voluntary organization, remains limited in its ability to be the sole source of insurance regulatory reform,” said Schmelzer. “There must be a trusting partnership between regulators, industry and legislators to bring about the comprehensive, fundamental reform of public policies on which there appears to be an ever-growing consensus.”

“Preservation of the state regulation of insurance depends on the ability of those within state insurance departments to embrace change,” said NAMIC Market Regulation Manager, and former Indiana Deputy Commissioner, David Reddick.

Under the terms of the Gramm-Leach-Bliley Act (GLBA), should fewer than 29 states establish a uniform or reciprocal licensing system for agents and brokers before November 2002, the National Association of Registered Agents and Brokers, a semiautonomous agent-licensing clearinghouse, would be created.

Stating threats to state regulation do not come from industry, but Congress, the NAMIC suggested that Congressman Dingell as well as the Financial Services Committee and Chairman Oxley will examine the GAO report carefully and respond as they deem appropriate.

The GAO report concluded that timely completion and ultimate success of NAIC’s initiatives remain uncertain. It suggested that NAIC initiatives to promote sound and uniform regulatory processes throughout the nation are being tested as pressure builds from both the GLBA and other forces seeking more efficient and streamlined insurance regulatory processes.

“If state regulation is going to survive, state legislators will have to step up to the plate and get behind the NAIC initiatives and support their regulators,” Reddick said. “One wonders if that is going to happen after watching the New York Legislature recently refuse to renew a flex rating law in that state. By not renewing the law, the New York legislators set rate regulation back instead of finding a way to improve the regulatory system.”

A copy of the full GAO report is available on NAMIC’s website at www.namic.org.

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