NAIC’s accreditation process criticised
Many industry figures have spoken out on the role of the National Association of Insurance Commissioners (NAIC) since the director of the Federal Insurance Office was asked to review whether the NAIC is a viable regulatory body.
Representative Edward Royce of the FIO wrote to FIO director Michael McRaith asking to clarify the role of the NAIC in July 2012.
John Harkavy, executive vice-president and general counsel of Risk Services, LLC, has since described the NAIC’s accreditation regime as “egregious, operating in blatant violation of state and federal anti-trust law”.
He cited, Earl Pomeroy, former president and North Dakota insurance commissioner, who reportedly said: “We do not see these standards as voluntary … the state insurance departments have devised sanctions which are based on their legal power to impose additional regulatory requirements on companies based in non-complying states.”
Harkavy argued the accreditation programme profoundly affects state legislative processes, insurance department staffing and regulatory conduct, costs and conduct of domestic insurers and ultimately the availability of insurance products.
He said: “Thus you have the NAIC, a private trade association, leading a boycott sanctioned accreditation programme based on required enactment of the model laws and procedures it enacts with none of the procedural safeguards imposed on state or federal legislatures.
“Its members act as an exclusive judge and jury as to which states become accredited and which do not. This is not a sound basis for public regulation or representational democracy.”
The NAIC describes itself as a non-profit organisation. It states that its role is to assist state regulators, individually and collectively, in serving the public interest and achieving fundamental regulatory goals.
These goals include: protecting the public interest, promoting competitive markets and facilitating the fair and equitable treatment of insurance consumers, promoting the reliability, solvency and financial solidity of insurance institutions, and supporting and improving state regulation.
“The NAIC as a non-profit corporation does not have regulatory authority, and I am not aware that it has ever presented itself as having such authority,” said an NAIC spokesperson.