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State insurance regulators are making progress on several form-filing and licensing initiatives that use computer-based technology to improve the regulation of insurers.
Regulators "are literally reinventing the way the insurers and the producer community can interface with the many state insurance regulators around the country," said Glenn Pomeroy, the North Dakota insurance commissioner and president of the National Assn. of Insurance Commissioners. "We can make that work a lot better through these initiatives," which are included in a program known as "State Regulation 2000," he said (BI, Feb. 9).
One of the most important NAIC initiatives for insurers is the System for Electronic Rate and Form Filing, which permits insurers to exchange rate and form-filing information electronically with state insurance departments and eases communication, management, analysis and electronic storage of those filings.
"Seven states and 16 companies have moved this program out of pilot testing and into actual production," including his North Dakota Insurance Department, Mr. Pomeroy said recently.
Life insurers in particular welcome this program. "The life industry finds that policy form filing process really needs improvement," said Patty Parachini, legislative director for the American Council of Life Insurance in Washington.
However, some insurers participating in SERFF are a little concerned because some state insurance departments still are requiring them to follow their electronic submissions with traditional paper filings, said Lenore S. Marema, vp-legal and regulatory affairs for the Alliance of American Insurers in Downers Grove, Ill. That duplicates the work for insurers rather than streamlining it.
While the American Insurance Assn. shares that concern, "we believe this (duplicate paper filing) is a temporary thing," said Michael Lovendusky, assistant general counsel with the AIA in Washington.
Insurers also are interested in the Accelerated Licensure Evaluation and Review Techniques initiative, which is designed to eliminate insurer licensing and approval barriers in multiple states and increase uniformity and consistency across state boundaries.
As part of the ALERT program, the NAIC has developed a Uniform Certificate of Authority Application that insurers can simultaneously file with multiple states, attaching only a few state-specific items to each state's copy of the filing. Prior to the uniform application, each state had a different application format, set of required documents and review process.
"Seven states in March signed on to this uniform application process, and I am happy to report that number is now 10, and I am told that an additional 20 states are very actively considering what they must do in order to sign on to the ALERT program," Mr. Pomeroy said.
While acknowledging the ALERT initiative's progress so far, Ms. Marema is "skeptical" about individual states' willingness to move toward greater uniformity by relinquishing their state-specific requests for information.
Other initiatives include the Producer Database, which will allow states and insurers to share information -- including biographical and enforcement data -- about agents and brokers, so they can make better decisions about who should be able to sell insurance in the United States.
Currently, insurance departments in 14 states -- representing 70% of U.S. producers -- regularly send information to the database. Five additional states -- Arizona, California, Connecticut, Illinois and New Jersey -- are expected to join them soon.
New York's recent decision to participate received an enthusiastic response from Mr. Pomeroy. That was a "huge step because of the size of the state and the producer population," he said.
The NAIC also is making progress in establishing its Producer Information Network, which will allow regulators and insurers to exchange producer-related information about appointments, terminations and license applications. A pilot project to test the PIN network, involving Iowa and Missouri and five insurers, will be completed by August, after which all states and insurers will be invited to participate.
Other NAIC initiatives focus more directly on agents and brokers, including the Uniform Treatment Project, which seeks to reduce discriminatory practices and barriers in the appointment of non-resident agents and brokers and encourages state regulators to accept a uniform licensing application form. Examples of discriminatory practices some states impose on non-resident agents and brokers include banning the sale of insurance by non-residents without an office in the state.
A driving force behind this streamlining effort is the possibility of federal pre-emption of regulatory authority over the licensing of agents and brokers (BI, Feb. 9). A pending federal financial modernization bill would create a National Assn. of Registered Agents & Brokers, a national clearinghouse for insurance broker licensing that could eventually pre-empt states' authority to impose disparate requirements (BI, July 7, 1997).
For state insurance regulators, the main barrier to streamlining producer regulation is getting the issue up high enough on commissioners' radar screens so that they commit to it and begin working to implement it, Mr. Pomeroy said. That may include asking their respective state legislatures for statutory changes, he added.
"It's important to get as many states on board as possible," the ACLI's Ms. Parachini said.
From insurers' perspective, they are waiting for a critical mass of states to adopt the new initiatives, the AIA's Mr. Lovendusky said. For the Producer Database, he roughly defined that benchmark as involving 80% of agents and brokers and the 10 largest states. In addition, the information would have to be updated at least weekly, he said.
A major fund-raising drive is under way primarily to help the NAIC develop the producer-related initiatives. The current campaign seeks about $3 million to $4 million from primarily property/casualty insurers, said Larry Kibbee, vp-director of public affairs with the Alliance. The life insurance industry previously provided about $3.5 million for these initiatives.