In the spring of 2000, the National Association of Mutual Insurance Companies (NAMIC) released a report which noted that a critical mass of activity is pushing policymakers in the direction of creating more uniform insurance regulatory procedures and greater consistency of state standards.
While uniformity remains important, getting products to consumers as quickly and economically as possible is the pressure point for insurers. Prior approval is time-consuming, costly and denies consumers the advantages of new and improved risk-sharing vehicles. It also compromises the ability of insurers to compete with other segments of the financial services industry that are regulated differently.
Some advocate a federal solution to overcome the inefficiencies inherent in state government approval of pricing and services. NAMIC still believes that open competition can be accomplished in the existing state model of insurance regulation. NAMIC member companies believe that competition is the answer, preferably within the state regulatory framework.
Allowing rates and forms to be determined by the marketplace will transform the industry and should eliminate many concerns of those who favor federal regulation. But the regulation of rates and forms through the competitive marketplace is a daunting prospect to the regulatory community and consumer advocates. They equate industry's call to a request for no regulation at all.
Such reform would surely allow companies the opportunity to enter more markets with fewer impediments. It would also protect consumers by ensuring fair market prices, creating more choices and allowing regulators more resources to enforce proper conduct in the marketplace. We think these are worthy public policy goals that should be fully explored with an open mind by all interested parties.
Regulators working through the NAIC have emphasized reform of the "process" of regulation that is, the approval of licenses, rates and forms. The National Conference of State Legislatures (NCSL) and the National Council of Insurance Legislators (NCOIL) are also taking up the issue of rate and form regulation. Discussion of the "enforcement" side of the debate must continue to move forward to build confidence in a new approach to market conduct. Such confidence is essential to the achievement of a competitive regulatory environment.
With this paper, NAMIC begins to suggest answers to genuine concerns about consumer protection in a purely competitive pricing and service system. Our proposal is based on a set of principles that should provide a framework for this deliberation: an emphasis on efficiency, remediation and better service to consumers.
If realized, in tandem with the achievement of open competition in insurance markets, all stakeholders in insurance will benefit. To reach for anything less than fundamental public policy reform when the pressure for change is at its highest would at least be a miscalculation of the possibilities for change. For certain, it would be insufficient to discourage efforts to secure federal regulation of the insurance industry.
The opportunity, for consumers, regulators and industry, is simply too great to ignore.