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NAMIC Urges NAIC, NCOIL Leadership to Stay Focused on Reform While Pursuing Agent-Broker Inquiry

INDIANAPOLIS (Nov. 4, 2004)--Emphasizing its support of a reformed state insurance regulatory system based on marketplace competition, the nation's largest property/casualty insurance trade association has urged the leaders of two key policymaking organizations not to be distracted from that objective while following up on New York Attorney General Elliot Spitzer's investigation of agent-broker practices.

NAMIC wrote Wednesday to Pennsylvania Insurance Commissioner Diane Koken, president of the National Association of Insurance Commissioners (NAIC) and Florida State Senator Steven Geller, president of the National Conference of Insurance Legislators (NCOIL).

In the letter, NAMIC Senior Vice President of State and Regulatory Affairs, Roger H. Schmelzer singled out recent efforts to effect modernization of rating laws and market conduct regulations "as adding critical momentum to the long-term campaign to achieve fundamental reform." He cited rate modernization, insurance regulation, civil justice reform and a preference for competition as areas of reform that have been questioned since Attorney General Spitzer announced his probe.

While stating that NAMIC supports efforts to address allegations of bid rigging-which has no place in any industry, Schmelzer noted, "such criminal prosecutions do not support a wholesale readjustment of legitimate and vitally important reform initiatives" to promote greater competition in the insurance marketplace.

Acknowledging it is a difficult challenge "for policymakers to review any alleged misconduct in an objective and impartial manner while under pressure to take action of some sort," Schmelzer encouraged regulators and legislators to assert their regulatory and policymaking authority rather than permit a process of "regulation by litigation.by which jury verdicts and negotiated settlements effectively create new de facto insurance regulations or abrogate existing ones."

Schmelzer cited new rules recently proposed in California that will also be considered by the NAIC and in other states as examples of efforts to respond to the Spitzer allegations that might have anti-competitive results. One such rule "would require brokers to find the 'best available insurer' for their clients," a standard that Schmelzer said "would actually harm consumers, because brokers would refrain from making recommendations to consumers for fear of liability."

Another proposed rule would require personal lines agents to disclose their commissions, even though agent commission schedules are already subject to examination in California's pre-approval rating process. Requiring additional commission disclosures for personal lines agents, wrote Schmelzer, "would constitute an unnecessary and burdensome redundancy."

Instead of adding to the complexities of the current regulatory regime, Schmelzer urged Commissioner Koken and Senator Geller to "remain steadfast in their commitment to the goal of regulatory modernization." He cautioned against acting under pressure and enacting "counterproductive measures that would impede, if not derail, that process" which he said would be "a significant setback for the U.S. insurance industry."

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For further information contact:
Robert Detlefsen at rdetlefsen@namic.org
or (317) 875-5250