NAIC Winter  Meeting Roundup
Commissioners Approve Interstate Compact, Postpone Action on Insurance Scoring, Privacy
By Ellen Sanders
Assistant Vice President, Regulatory Affairs
The National Association of Insurance Commissioners (NAIC) held its winter meeting in San Diego, California December 7 through 10, 2003. The group passed the Interstate Compact, but postponed action on insurance scoring and privacy. The following is a summary of actions that were taken at the Winter meeting:
On December 8, Commissioners approved the creation of a new interstate compact to potentially regulate certain insurance products. The new Interstate Insurance Product Regulation Compact (IIPRC) is designed to benefit consumers, insurance companies and state regulators by modernizing the existing state-based insurance regulatory system.
The vote was the culmination of more than 10 months of meetings, public hearings and drafting sessions. The NAIC will now present it to state officials, including lawmakers and policy makers, for their review, input and consideration.
The next day, the NAIC Management Committee working group held its organizational meeting to begin discussions of the types of standards that should be developed for the Compact, how to draft the bylaws, and other issues of concern to the regulators and legislators. The ultimate purpose of the meeting was to demonstrate to others, particularly legislators, how the NAIC will develop standards and resolve many of the controversial issues that are to be addressed in the bylaws.
Once enacted, the Compact will benefit consumers, industry and the states by creating a single, uniform set of standards and processes for regulatory approval of insurance products, including life insurance, annuities, disability income and long-term care products. While improving industry competitiveness and the "speed to market" of new insurance products, a formal IIPRC will provide a "one-stop-shop" filing process for insurance products while maintaining the existing state-based regulatory system.
Premium Pass-Through Accounts
The NAIC's Fraud Task Force will be considering model legislation during 2003 to prohibit commingling of funds by agents. This action was prompted by the increasing number of agencies getting themselves in trouble in states that allow commingling.
Prior to the meeting of the task force, PIA's Senior Vice President Patricia Borowski spoke with the chair about this issue. As a result of those conversations, the chair agreed to pursue a New York-type model, which is a type of insurance premium pass-through trust account process.
Under this type of model, agencies must segregate their accounts by opening a single premium account in an FDIC insured institution. All premiums for all carriers and clients then go into this account. These monies are accounted for by insured and carrier, and held in the interest of each carrier. With the agreement of the carrier, agencies can retain their commissions, earning and retaining the interest from the full account's earnings. There is an obligation between the producer and carrier(s) for the producer to be fully obligated for those funds even if the bank goes under.
This type of arrangement establishes the "trust" aspect fraud departments seek, but respects it as an insurance premium pass-through. It uses existing FDIC as well as traditional insurance premium accounts language.
Workers' Comp Privacy
The NAIC membership adopted an amendment to the 2000 NAIC Privacy of Consumer Financial and Health Information Model Regulation, requiring workers' compensation insurers to send privacy notices to the employers they cover or injured workers who file claims.
This amendment was actively opposed by the industry, including PIA, because the original privacy model applies only to personal lines writers, not commercial writers. (Workers' comp writers had the option of sending privacy notices to policyholders.)
Approximately 37 states have already adopted some form of privacy regulations or legislation. The NAIC-approved amendment will become effective only in those states that adopt it.
Action Postponed on Insurance Scoring, Privacy
Prior to the winter meeting, the NAIC circulated a draft consumer booklet on insurance scoring and a draft matrix of regulatory options, including pros and cons of each option. Many of the members on this task force will be changing in 2003, as commissioners are replaced by incoming administrations. Therefore, the task force delayed further consideration of these items until early 2003.
Similarly, the Privacy Notice Subgroup postponed further work on a draft white paper that highlights some of the difficulties of drafting a "simple, user friendly, reasonable length" privacy notice.
What's Coming in 2003 at NAIC
During 2003, the NAIC will be focusing on several issues of great interest to PIA members, including producer licensing and appointments, and implementation of the terrorism backstop legislation. PIA is already working with the NAIC leadership and industry to develop ideas and approaches.
Ellen Sanders can be reached at firstname.lastname@example.org and 703-518-1363.
This article originally appeared in the January 2003 PIA Connection.