The Government Accountability Office (the "GAO") recently issued a report regarding its review of the steps made by the National Association of Insurance Commissioners (the “NAIC”) and state regulators to make rules regarding producer licensing, product approval, and market conduct regulation more uniform and reciprocal. While the report notes that progress in these three areas has been made, the GAO believes that several challenges still remain.
According to the report, “reciprocity of producer licensing among states has improved, but consumer protection and other issues present challenges to uniformity and full reciprocity.” The report states that according to NAIC officials, as of March 2009, only 17 states were performing full fingerprint-based criminal background checks, and “some states that do such checks have been unwilling to reciprocate with states that do not.” Other areas that lacked uniformity and reciprocity in producer licensing were access to disciplinary records of other regulators and how state regulators define lines of insurance.
With regard to product approval, the report noted that “the NAIC and state regulators have improved product approval filings by creating the System for Electronic Rate and Form Filing (SERFF) in 1998, which, according to some industry participants, has simplified filings and reduced filing errors.” However, according to the report, “SERFF does not address differences in regulators’ review and approval processes.” The report discussed the Interstate Insurance Product Regulation Commission (the “Interstate Compact”), created in 2006, which, as of March 2009, facilitates the approval of certain lines of insurance across 35 participating states. However, the report notes that the Interstate Compact “leaves some decisions on approval up to the individual states, and several key states have not joined because they feel their processes and protections are superior to the Compact’s.”
As for creating more uniformity and reciprocity in market conduct examinations, the report mentioned several efforts led by the NAIC to develop uniform guidance and core competency standards to be part of an accreditation process for market conduct regulation. Yet despite that these efforts have yielded better communication and coordination, the report stated that their “effect on uniformity of market conduct regulation is uncertain.”