For the NAIC, this is fast. But there
actually was a change—or two. Federal pressure is
starting to mount.
Scott Sinder and John Fielding
Although the weather was cool and foggy, there were signs at
the NAIC’s summer meeting in San Francisco that insurance
regulators are starting to feel the heat in a number of areas.
To say there was a lot of action at the meeting would be an
overstatement. This is the NAIC, after all. But there is some
movement on issues important to us and on general NAIC
housekeeping issues that reflect the pressure brought to bear
by pending federal legislation, including the optional federal
charter bill in the Senate and the surplus line bills in both
Even the regulators acknowledge that surplus lines
regulation is a mess. Indeed, the NAIC has told Congress that
commissioners believe some federal intervention is necessary.
They tried years ago to fix the premium tax allocation problem,
but self-interest stood in the way. With the passage of surplus
lines reform legislation in the House last year and its
reintroduction in both chambers of Congress this year,
regulators appear to be facing reality. They will have to take
action whether or not they want to.
Several organizations are advocating an interstate compact
proposal as the answer to the surplus lines regulatory morass.
An ad hoc group, including NAPSLO and the state surplus lines
organizations, as well as some regulators and a number of
industry representatives, met in San Francisco to discuss the
draft compact proposal, which addresses the tax allocation
problem as well as conflicting state reporting and other
requirements. The Council and the other insurance producer
trade groups have not been included in the drafting process,
though we will participate in the NAIC’s
The compact proposal was formally presented to the NAIC at a
meeting of its Surplus Lines Task Force in San Francisco. The
meeting ended inconclusively, although it is apparent that many
regulators agree federal action is necessary to fix the
problem. An interstate compact may ultimately be required to
implement a federal law, but the prospects for fixing the
surplus lines regulatory situation without federal action are
slim to none.
The NAIC meeting yielded little progress on producer
licensing reciprocity and uniformity issues. The NAIC
leadership’s so-called producer licensing
“initiative” was mentioned in passing by Walter
Bell, the NAIC president and Alabama insurance commissioner,
but details have yet to emerge.
NAIC Vice President Roger Sevigny, the New Hampshire
insurance commissioner, has initiated an NAIC/industry
“Producer Licensing Coalition” meeting. Sevigny
says the coalition will focus on producer licensing uniformity
and reforms that may be “most meaningful to providers,
producers and consumers,” including:
• Evaluating and promoting the implementation of
uniformity standards that matter most nationwide;
• Developing national professional producer standards
that should uniformly apply to all licensed insurance
• Evaluating national uniform licensing standards and
national professional producer standards to outline those that
fall within the authority and responsibility of the
states’ regulatory review processes.
Although we are hopeful that this signals regulators’
willingness to take real action, we will believe it when we see
it. In the meantime, we will continue to push the NAIC and the
states to make good on their promises to fix the burdensome
regulatory producer licensing structure.
The NIPR Board also approved a
price reduction for its highest volume
products—appointments, terminations and producer database
“look-ups.” The Council is a member of the NIPR
The five-cent reduction on these transactions begins Jan. 1.
As of July 1, the transaction fee for non-resident licensing
applications was reduced by 15%. NIPR also will begin absorbing
credit card fees for state licensing charges on both resident
and non-resident licenses. The annual savings to industry is
about $2.5 million.
The new NAIC model law
approval process hit some bumps when it was applied for the
first time. The new approval process, adopted in May, requires
NAIC leadership to sign-off on development of a new model law
prior to drafting. To be approved, the model law must address a
national issue that requires uniformity among all states, and
regulators must be committed to advocating for the model in
Regulators claim the new framework will inject discipline at
all phases of the model law process and will ensure new models
are relevant to the needs of many states. Policy initiatives
that do not receive widespread support as a model could still
be drafted in the form of guidelines.
Even before the meeting, the new model adoption process
created controversy because it was devised by the NAIC
leadership without input from the industry or consumers. As
regulators debated adoption of two controversial new models
(dealing with viatical settlements and sales of insurance to
military personnel), much of the discussion focused on what
level of commitment was required for support of a model and
whether the regulators had authority in their home states to
push a particular law.