CAS SEMINAR ON RATEMAKING GENERAL SESSION II EMERGING ISSUES

advertisement
CAS SEMINAR ON
RATEMAKING
GENERAL SESSION II
EMERGING ISSUES
MARCH 2001
EMERGING ISSUES
Moderator

Carole J. Banfield, Insurance Services Office, Inc.
Panelists




Mona Carter, Kentucky Department of Insurance
Peg Ising, Ohio Department of Insurance
Sonja Larkin-Thorne, The Hartford Financial
Services Group, Inc.
Lenore Marema, Alliance of American Insurers
EMERGING ISSUES
AGENDA
1. Background
1.
2.
3.
4.
5.
Impact of Gramm-Leach-Bliley
Need to modernize state regulation
Doing business globally
E-commerce
Optional Federal Charters
EMERGING ISSUES
AGENDA
1. NAIC Activity
 Statement of Intent
 Improvement to State Based Systems
 Coordinated Advertising, Rate and Form
Review Authority (CARFRA)
 Privacy
 National Treatment of Companies
EMERGING ISSUES
AGENDA
1. Planned NAIC Activity
 Personal Lines
 Next Steps/Implementation Plans
EMERGING ISSUES
AGENDA
1. Some Major Company Implications
 Privacy/Agents Licensing--What states
must do
 Filings
 Data Collection
 Market Conduct
 Company Licensing/Optional Federal
Charters
EMERGING ISSUES
Background
1. Gramm-Leach-Bliley (Financial Services
Modernization Act) enacted in November
1999
2. Eliminated barriers to affiliations among
banks, securities firms and insurance
companies
3. New order of financial regulation
EMERGING ISSUES
Background
1. Doing business globally--requires
uniformity in:



Regulation
Privacy
Other areas
2. E-commerce
Major effort underway at the NAIC
Going beyond GLB--Undertaking
Regulatory Modernization
What states must do after GLB
What states need to do after GLB
to modernize regulation
REGULATORY
MODERNIZATION
NAIC Statement of Intent
1. Improve Speed to Market
1. Operational Efficiencies
2. Commercial Lines Rate Regulation
3. Regulatory Framework Efficiencies
2. Reform system of rate and form filings
1. Coordinated Advertising, Rate, and Form
Review Authority (CARFRA)
REGULATORY
MODERNIZATION
NAIC Statement of Intent
1. Market Conduct Reform
2. E-commerce that protects the
consumer
3. National Treatment of Companies
Improvements to State-Based Systems
AREAS OF WORKPLAN
Operational
Efficiencies/
Best
Practices
Commercial
Lines Rate
Regulation
Regulatory
Framework
Efficiencies
Commercial Lines
Form Regulation
Personal Lines
Forms & Rates
Personal Lines Regulation--Tabled
Improvements to State-Based Systems
OPERATIONAL EFFICIENCIES
1. State Transmittal and Review Standards Checklists
2. Uniformity Among State Filing Requirements
3. 30 Day Review and Compliance Timeframe
4. SERFF Implementation and Usage in All States
Improvements to State-Based Systems
OPERATIONAL EFFICIENCIES
State Transmittal and Review Standards Checklists-Purposes:
1. Speed and Uniformity
2. Clear Guidance
3. Elimination of Unnecessary Regulations and Uniformity
4. Identify CARFRA Products
Improvements to State-Based Systems
OPERATIONAL EFFICIENCIES
State Transmittal and Review Standards Checklists—
Recommendations:
4. Certification
5. State Agreement/Memorandum of Understanding
•
Apply only the requirements set forth in the transmittal and
review standards checklists
•
Recognize that certain decisions are made based on regulatory
judgment that cannot be articulated in checklists (exception
rather than the rule)
•
Require approval by Commissioner or designee for regulatory
actions that conflict with checklists
Improvements to State-Based Systems
OPERATIONAL EFFICIENCIES
SERFF Implementation in All States:
1. Adequate Funding and Resources
2. Integration and Customization
3. Cost Structure
4. Support Staff
5. Customer Input/Value Added
Improvements to State-Based Systems
SERFF Status
All Lines
(9)
Arkansas
District of Columbia
Maine
New Hampshire
North Dakota
Ohio
South Dakota
Utah
Wyoming
Limited Lines
(12/9 (P&C))
California (L,D)
Colorado (H,P,C)
Indiana (Personal, L)**
Kansas (L,A)
Kentucky (L,P,C)
Missouri (L,H,P,C)
New York (Some P,C)**
North Carolina
Oklahoma (P,C)
Tennessee (P,C)
Texas (GL, CP, IM)
Washington (P,C,L,D)
Licensed/Not in
Production (17)
Alabama**
Arizona
Connecticut
Florida
Illinois
Iowa
Louisiana
Maryland
Michigan**
Minnesota
Mississippi
Nebraska
New Jersey
New Mexico
Oregon**
Pennsylvania**
Wisconsin
Not Licensed
(13)
Alaska
Delaware
Georgia
Hawaii
Idaho
Massachusetts
Montana
Nevada
Rhode Island
South Carolina
Vermont
Virginia
West Virginia
Improvements to State-Based Systems
REGULATORY FRAMEWORK--DEFINITIONS
Prior Approval
Approval Before Use
File and Use
File rates, rating manuals,
actuarial information and
policy forms on or before
the date of use.
Informational/
Competitive
File rates, rating manual,
policy forms, explanatory
memorandum. No
supporting actuarial info
required
Compliance Review
No review for approval or
compliance upfront
Discretion to determine the
nature and extent of this
review
Statutory standards apply
Presumption of prospective
corrective action
(overcome when
retrospective is necessary
based on nature and extent
of consumer harm and
other factors (ex: Costs)
Market Conduct Authority
Remains
White Paper 1998 Definition
No Filing
No Information Required
Statutory Standards Apply
Insurer must maintain all
information relating to the
rate, rate manuals and
policy forms
Regulators may ask for
information to ensure
compliance with statutory
requirements or at request
of consumers or other
insurers
*No discussion of ECP
*No Findings on Total
Deregulation
Improvements to State-Based Systems
Commercial Lines Rates
No Filing
Information
Filing
Prior
Approval
File and
Use
Workers’ Comp.*
Title Insurance
Advisory Orgs.
Filings*
Mortgage Guar.*
Mortgage Guar.*
Financial Guaranty
Aviation
Most Commercial Lines
Ocean marine
Workers’ Comp.*
Employment Practices
Commercial Marine
Directors & Officers
Boiler & Machinery
Nuclear Insurance
Commercial Credit
Residual Mkts.
“A” Rated
Advisory Orgs.*
Consent to Risk
Non-Competitive
ECPs
Improvements to State-Based Systems
Commercial Lines Forms
No Filing
Information
Filing
Prior
Approval
Title Insurance
Mortgage Guar.*
File and
Use
Most Commercial
Lines
Workers’ Comp.*
Reference to Advisory
Organization Filings
Financial Guaranty
Aviation
Ocean marine
Employment Practices
Reference to Other
Insurers’ Filings
Products with Coverage
Floors
Commercial Marine
Directors & Officers
Boiler & Machinery
Nuclear Insurance
Reference to Other
Insurers' Filings
Commercial Credit
Advisory Org. *
“A” Rated
Mortgage Guar*
Consent to Risk
Residual Mkts.
Advisory Org.*
Non-Competitive*
ECPs
CARFRA
CARFRA (Coordinated Advertising, Rate
and Form Review Authority)
1. Quality Reviews
2. Fast Review
3. Single Point of Filing and Review
4. National Standards
CARFRA
Limited Launch—10 States
1. New York
2. Texas
3. Michigan
4. Pennsylvania
5. Maine
6. Oregon
7. Ohio
8. Indiana
9. Arkansas
10.Alabama
CARFRA
Review Panels-Review Process
1. Filing with the CARFRA electronic repository
2. 5 Member Review team appointed from the pool
of state analysts meeting qualification standards
3. Review of filing according to the national
standards
CARFRA
Review Panels-Advisory Recommendation
1.
The review team’s Advisory Recommendation
will be communicated to states
2.
The review decision is adopted by the states
CARFRA
Review Panels-MOU/Acceptance
MOU will commit state to accept a review panel’s
recommendation unless:
1. State law or other relevant legal authority
prohibits the action proposed; or
2. Regulatory action has been taken against
the insurer that may prohibit the insurer
from operating in the proposed manner.
CARFRA
Review Standards—National Standards
1. Single set of national standards created for each
limited launch product
2. Self Certification for State Specific Requirements
3. National standards created from a review of
statutes, regulations, best practices, NAIC model
acts, and input form interested parties
4. Process evaluated as possible basis for creating
national standards for additional lines of
insurance
National Treatment of
Companies
NAIC Plan
1.
2.
3.
Adoption of Best Practices: Develop “best practices”
applications by December 2000 and June 2001,
respectively
Implementation by MOA: Implement national treatment
process through memorandum of agreement between
June 2001 and June 2002.
Possible State Legislation: If necessary, develop
enabling state legislation to implement any component
of national treatment system requiring statutory changes
for enactment by June 2003
Planned NAIC Activity
Personal Lines Rate & Form
Regulation-Work Plan for 2001
1. Study whether a file and use system for
personal lines forms is appropriate
2. Study whether a file and use system or flexrating system is appropriate for personal lines
rates
3. Evaluate deregulation and competitive rating for
personal lines rates
Next NAIC Steps
1. Develop and Implement Transmittal and Review
Standards Checklists
2. Implement SERFF—Plan Approved
3. Review Regulatory Framework (e.g. Commercial
Lines File and Use and Informational Filings)—
Assess Need for Legislation
4. Conduct Staff Educational Meeting


5.
Communicate commitment to the Plan; and
Create a sense of urgency for completing the Plan with the
specified timeframes.
NAIC Memorandum of Understanding
Implementation Plans
Uniformity and Consistency Among State Filing
Requirements--Implementation (July 2001–December
2001):
1.
Eliminate All Desk Drawer Rules
1.
Eliminate Unnecessary Regulatory Requirements
1.
Maintain and Add Necessary Regulations
1.
Uniformity
2.
Standardized Transmittal Form
Implementation Plans
Review and Compliance Timeframe—30 Days
Implementation:

Operational Standard: 30 Days whether Prior
Approval, Deemer, or File and Use (45 day until
checklists implemented in June 2001)

Extensions: One 30 day Extension (Exception rather
than rule)

Review for Completeness: 15 Days
Implementation Plans
Review and Compliance Timeframe—30 Days
Implementation:





Substantive Review Timeframe: 15 Days Target; 30
Days Final
Monitoring System: SERFF or other system by June
2001
Filing Frequency Requirements: Eliminate, except
in flex rating
P&C Model: Revise to incorporate these
recommendations
State Agreement/Memorandum of Understanding
Implementation Plans
Commercial Lines Rates





Determine Specific Authority to Move to
Information Filing
If Discretion, Identify Competitive Markets by
March 31, 2001
If Authority Does Not Exist, Seek Legislation (18
Prior Approval)
If File and Use State, Consider Effectively
Implementing Information Filing (20 States) (10
States—Use &File)
Adopt Monitoring Competition Provisions
Implementation Plans
Commercial Lines Forms





Evaluate Laws for Authority to Move to File and
Use
If Authority, Identify Competitive Markets by March
31
If No Statutory Authority, Seek Legislation
NAIC To Monitor Implementation—Report by March
31
Revise P&C Rate & Policy Model Law
Implementation Plans
Competition and Information Needs
1.
Information Needs/NAIC Charge: Study additional
information needs to enhance process of monitoring and
promoting competition (Dec. 2001).
2.
Competitor Pricing Information: Obtain sufficient
information to allow access to competitor pricing
information.
3.
Annual Statistical Reports: Continue to receive annual
detailed statistical reports to facilitate market entry and
solvency.
Implementation Plans
Competition and Information Needs




Advisory Organization Loss Costs: Continue to
allow insurers to use loss costs developed by advisory
organizations.
Consumer Complaints Information: States and
NAIC should publish consumer complaints information
in appropriate form. States should publish insurer
financial information.
Market Conduct Exams: Publish final results of
market conduct examinations.
Public Availability of Filings: Make filings publicly
available.
Implementation Plans
State Transmittal and Review Standards
Checklists— Implementation:



State Filing Transmittal Checklist—June 2001
State Filing Review Standards Checklists—June 2001
Speed To Market Working Group Charges—March 2001
• Provide guidance to states in developing transmittal and
review standards checklists
• Develop published central filing repository for checklists
and procedures for publishing on state websites.
• Develop procedures for amending checklists
• Establish method to monitor states use of checklists
• Establish procedure to disseminate information on state
disapproval reasons
Some Major Company
Implications

Privacy & Agents Licensing
1. Two issues states must address after
GLB
 Privacy--July 2, 2001 implementation
 Agents Licensing--29 states must act by
November 2002
2. First major test of functional
regulation after GLB
Some Major Company
Implications

Privacy & Agents Licensing
1. 2001 state legislative sessions--We’re
working on it!
2. How important is uniformity?
 3 model privacy acts will not result in
uniformity by July 2001
 Some local agent opposition
3. Is more federal intervention on the
horizon?
Some Major Company
Implications

Filings
 Much to be gained from states’
implementing NAIC “best practices”

Law is not always the problem
 More legislative change may be needed
 SERFF: Speed to Market vs. Speed to
Destination
 Personal lines simplification needed as
well
 Short term success stories are needed
Some Major Company
Implications

Data Collection
1. Regulators need data to respond to market
disruptions and consumer complaints
2. Consumers demand more data from insurers

Access to individual insurer filings
3. More rate and form freedom vs. increased
statistical reporting--Is there a trade off?
4. Can data requests be more standardized
5. Personal lines writers--More data but no less
regulation?
Some Major Company
Implications

Market Conduct Modernization
1. Simplifying, streamlining, coordinating
market conduct vs. raising the bar in
all states
2. Is domestic deference the answer?
3. Catch 22 for personal lines writers?
No upfront deregulation but backend
market conduct regulation
Some Major Company
Implications

Market Conduct Modernization
1. Minimum Standards For Resources/
Alternative Mechanism
2. Enhance Coordination and Uniformity
(Focus resources on violations that
have the greatest impact on
consumers)
3. Monitoring Mechanism
4. Encourage Self Audit and Self
Reporting
Some Major Company
Implications

Company Licensing & Optional
Federal Charters
1. Are we on ALERT yet?
 Uniformity vs. streamlining--Is there
compatibility?
2. National Treatment
 Necessary?
 Doable?
 Pros and cons of domestic deference
Some Major Company
Implications

Company Licensing & Optional
Federal Charters
1. Federal charters
 Two regulatory systems better than one?
 Where does state regulation end and
federal charter begin?
2. Competitive equality for insurers
3. Known state system vs. unknown
federal system
Future Directions: Will
States Succeed in
Regulatory Modernization?

Continued Federal scrutiny
 GAO investigations
 Congressional hearing




Insurer insolvency: Has the tide
turned?
Consumer pressures
Local pressures--Commission turnover
Insurance department funding
CAS SEMINAR ON
RATEMAKING
GENERAL SESSION II
EMERGING ISSUES
MARCH 2001
Download