Expert industry panel;
Commissioner reject federal oOversight

PIANH Vice President Lisa Nolan (at Podium); National Association of Insurance Commissioners President-Elect and New Hampshire Insurance Commissioner Roger Sevigny; Christopher Henchey, vice president, MVP Healthcare of New Hampshire and Marita Zuraitis, president P&C companies, Hanover Insurance Co

Sevigny discussed the Blueprint for Financial Regulatory Reform developed by the NAIC; his NAIC work, especially as chair of the NAIC/Industry Producer Licensing Coalition; and producer licensing issues, including federal legislation that would amend the current National Association of Registered Agents and Brokers provisions, commonly called NARAB II. On producer licensing, the commissioner said the primary challenge has been with regard to reciprocity. He reported the NAIC is cannot support NARAB II, as the bill currently is drafted and said the NAIC working group is working on language of it’s own. “Reciprocity is not enough. We must develop uniform standards that cut across state lines,” he said, adding that the NAIC is vetting these amendments with both PIA and the IIABA and others.

Sevigny reported the NAIC is working with the National Conference of Insurance Legislators and the National Conference of State Legislators to bring these issues to Congress. He mentioned meeting with Congressional representatives, including Rep. Barney Frank, D–Mass., and Rep. Paul Kanjorski, D-Pa., with regard to regulation modernization.

On overall industry regulation and modernization, the commissioner noted the NAIC has spoken regularly with Kanjorski, who recently introduced a bill (H.R. 5840), that
would institute an Office of Insurance Information. Though the commissioner did not state a position on the bill, he noted a recent U.S. Treasury report that indicated modernization needs to occur.

“The NAIC agrees,” the commissioner said, “But, it does not feel we need an optional federal charter,” for insurers in order to accomplish this goal. Rather, he said, Congress should empower the states to modernize. “I don’t believe a ‘federal charter type national solution’ is the answer,” he said.

Sevigny said he would look for a number of elements in whatever reform the NAIC embraces, including: enforceable uniform standards applicable to all states; a plan developed by state regulators, who are closest to consumers; and the establishment of a forum with an equal voice for all regulators.

Much like the existing NARAB model, the commissioner suggested state regulators could set standards, which then could be imposed on the various states that do not comply, coupled with disincentives for non-compliance.

He indicated he would favor giving the states such “enhanced powers.” The NAIC also has considered an interstate compact approach, similar to that which is applied to life insurance products.

“Now, more than ever, state regulators need to work with state legislators to develop standards that comply with uniformity when necessary. You can expect more to come,” he promised.

Panelists agree

After the commissioner spoke, the panel discussion commenced. Questions focused on the issue of federal oversight and the industry’s future. Federal oversight was generally unwelcome at PIANH/IIABNH Joint Education

Zuraitis responded that, with a few exceptions (such as flood, terrorism and the life and annuities sectors) for which a role for the federal government exists, state oversight is a preferable system.

“Overall, the state system works well with regard to efficiency,” Zuraitis said. “The worst thing that could happen is over-regulation by both (federal and state entities). The Federal government could provide standards and best practices; however, the states should govern.”

Christopher Henchey agreed. “From the health-care prospective, I see NAIC is appropriate, and I still believe local regulators should have significant oversight over local issues.”

Henchey said federal oversight may be appropriate when a single state, like New York, “starts regulating as if it has authority over several states.” He wondered if the NAIC is looking at this issue.

The commissioner responded in the affirmative, noting the NAIC is paying special attention to issues of extraterritoriality. “The NAIC has a working group that is currently reviewing issues of bricks and mortar, which arise when states of any size (like New Hampshire and Massachusetts, or Connecticut and New York) have cross-border issues.”

As for the industry’s future, over-regulation was a concern for the industry representatives. Henchey said that increased scrutiny of the health sector had a positive side, but he voiced concern about over-regulation. “In Concord, legislation often is driven by personal, anecdotal data.”

Zuraitis also is concerned about over-regulation, and offered price flexibility and states seeking to abolish credit as an underwriting tool as prime examples. Additionally, in some states, regulation after the fact (citing Florida and coastal insurance as an example) concerned her.

“When insurance companies know the rules, they play fair and appropriately,” Zuraitis said. “Companies like to compete and work with independent agents. This works best when they (companies) know the rules of the game.”