Tag Archives: Gerhart

An Interview With Nick Gerhart (Part 2)

I recently sat with Nick Gerhart to discuss the regulatory environment for U.S. insurance carriers. Nick offers a broad perspective on regulation based on his experience: After roles at two different carriers, Nick served as Iowa insurance commissioner and currently is chief administrative officer at Farm Bureau Financial Services.

Nick is recognized as a thought leader for innovation and is regularly called on to speak and moderate at insurtech conferences and events. During our discussion, Nick described the foundation for the state-based regulatory environment, the advantages and challenges of decentralized oversight and how the system is adapting in light of innovation.

This is the second of a three-part series. The first part focused on the regulatory framework insurers face. In this second part, Nick provides the regulator’s perspective, with a focus on the goals and tactics of the commissioner’s office. Finally, in the third installment, we will discuss the best practices of insurers in compliance reporting.

In this conversation, we covered the tactics and process of regulation. In particular, Nick described the interactions – routine and targeted – between career and commissioner.

How is a commissioner’s office organized?

As I mentioned, the state of Iowa has a financial bureau and a market bureau. Within the market bureau is a fraud bureau. In addition, there is a securities bureau and regulated industries bureau.

As commissioner, you have to rely on your staff. In Iowa, each analyst has 10 to 12 companies to cover for a first-level review. We have great people in the state of Iowa, and we had a process for elevating issues. So, if they detected an issue, they would raise it pretty quickly. My goal was “no surprises.”

See also: Talking Insurtech With Regulators  

Analysts develop a deep understanding of the companies they supervise. We were fortunate, as we had a lot of people who had been there a long time. I would often joke that some of the people in the division knew the company as well as the people within the company because, in a way, they grew up together.

What are the touchpoints between a carrier and a regulator?

It really varies based on the size of the carrier, to be honest with you. The larger, more complex groups are going to have more touchpoints. Some of the larger companies would come in every quarter to present financials, for instance. On the other hand, you might only see the smaller carriers at a conference. So, it really varies based on the size of the organization and issues within them.

We also have other opportunities to interact, as well. For example, there are the NAIC meetings: three every year, including regulators and a number of companies, and there is often open dialogue between consumers, companies and regulators at those meetings.

How do you stay current with a carrier’s operations?

On the financial solvency side, you get to know a lot of these companies very well – reviewing quarterly blanks, annual blanks and financials. Also, every five years, you do a deep dive exam into these companies on the financial side, which is very cumbersome and, some would argue, burdensome. But, that’s why the system works.

It’s important to remember that these companies are not static – you don’t just put the information in a file or in a drawer and forget about it. They’re more like living and breathing entities, unique and changing and, we hope, always getting better. One tool that regulators use to understand the risks of the larger groups is the ORSA. That provides a deep review of the carrier’s risk and is a very powerful tool for insurance regulators.

So, the regulators approach each company uniquely?

To some degree, yes. I’ve always said: “If you’ve seen one ORSA, you’ve seen one ORSA. If you’ve examined one insurance company, you’ve examined one insurance company.”

They might all have a lot of similar issues, but they all have different issues, as well. Regulators need to regulate on risk basis. A number of factors such as size, market and product could lead you to a different approach. Due to resource constraints, it is important to regulate accordingly.

In terms of the reporting that comes through, with respect to MCAS [Market Conduct Annual Statement], quarterly, annual, various data calls, how does that work?

Those are all electronic now. It used to be paper-based and very laborious and time-intensive. Now, you get on your computer, and it’s just there. This is really a necessity based on the number of companies we regulate and the amount of data.

How do you handle and evaluate such a large quantity of information?

You can’t really have a formulaic, prescriptive approach; it’s got to be risk-based.

What I mean by this is you’re really starting to look for trends and outliers. You tranche it out by line of business, or size of organization, etc. It’s more of trend analysis in the context of what is happening in the marketplace. You can’t say “we’re always going to look for one way to do it.” As you know, things trend differently: from year-to-year or quarter-to-quarter.

If you see an anomaly, you start with context. If long-term care complaints spike, it might be simply because rates have increased – which, incidentally, the commissioner approved. You start to look for different trends on the consumer side, but you can’t really dive deep enough to every single thing you get on file to have a picture.

How does a risk-based approach factor into your analysis of a carrier’s market conduct data?

You look for trends, and I think MCAS [Market Conduct Annual Statement] is an example of how the regulatory system works pretty well.

As an industry, we come up with what we think is an acceptable replacement ratio for annuities, or lapses for life insurance, or complaints per premium, etc. If companies fall outside of these benchmarks, you start asking questions. Sometimes, there’s a really good answer. Other times, you may have another issue.

And this is really where the state-based system, depending on your point of view, either shines or has issues. Other states could have a different benchmark. Other states may say, “we’re just going to review the top ten because they are the biggest.”

My point of view is, just because a carrier is a certain size doesn’t mean that I want to look at them every year. I want to look for risks and problems. You look at things differently with a risk-based approach.

Take the ORSA [Own Risk Solvency Assessment], for example. Even though this is a solvency assessment, it also contains market analysis. Continuing the approach of applying context into the other areas that we regulate, and not just the big groups, works well. So, while a small or mid-sized carrier is not going to file ORSA, I think it’s a better regulatory approach than to say, “we determined that you just had too many complaints this year.”

See also: How to Bulletproof Regulatory Risk  

Is that a benefit of the state-based system? That Iowa might not be discounting the small carriers when they are looking at market conduct, while other states might look at just the bigger players?

Absolutely. On the market side, there is definitely a check and a balance.

I would say it this way: Commissioner Jones in California told me that he had 220 fraud investigators. Well, the state of Iowa has 115 employees in the whole department, and that includes insurance as well as securities. The state of Iowa has two fraud investigators. Iowa certainly doesn’t need 220, but it’s easy to see the disparity and the size of the market.

His biggest issue is the size of the California’s market. It’s the sixth- or seventh-largest in the world. And, it doesn’t have a ton of domiciled carriers. So, Commissioner Jones has different issues and takes a different approach. He may look at annuity sales and complaints per $1,000 in premium, or another metric. California has issues that are more uncommon to them simply due to the size of the market.

Are states more likely to identify different issues with a carrier?

Yes. We may not see the same issue that another state would because our market is smaller. This is why the concept of checks and balances makes sense. And that is why it works pretty well. You have different states with different markets that identify issues differently from Iowa, or California, or Florida, or another state.

Take Florida, for instance. They have a radically different population mix in terms of age and demographics, but also weather events. The issues unique to a state – hurricanes in Florida, earthquakes in California or Oklahoma, etc. – make for different issues and challenges that are best regulated locally. The system works well because it has a check and balance: Each state focuses on issues it identifies, which may not be as relevant elsewhere. Sometimes, it’s related to the size of the state’s market, sometimes it’s related to different risks in that state.

Continued….

An Interview With Nick Gerhart (Part 1)

I recently sat with Nick Gerhart to discuss the regulatory environment for U.S. insurance carriers. Nick offers a broad perspective on regulation based on his experience: After roles at two different carriers, Nick served as Iowa insurance commissioner, and he currently is chief administrative officer at Farm Bureau Financial Services.

Nick is recognized as a thought leader for innovation and is regularly called on to speak and moderate at insurtech conferences and events. During our discussion, Nick described the foundation for the state-based regulatory environment, the advantages and challenges of decentralized oversight and how the system is adapting in light of innovation.

This is the first of a three-part series and focuses on the regulatory framework insurers face. In the second part, Nick will provide the regulator’s perspective, with a focus on the goals and tactics of the commissioner’s office. Finally, in the third installment, we will cover the best practices of the insurers in compliance reporting.

Part I: The Regulatory Framework

You served as the chief regulator in Iowa: How do regulatory practices in Iowa compare with other states?

Every state essentially has the same mission. Iowa has one of the largest domestic industries, so we have to focus a lot on the issues that go along with having a lot of domiciled companies. We have over 220 companies domiciled in Iowa. I believe that is the eighth most in the country; therefore, we are a top-10 state in the number of domiciled carriers. So, how we focus may be a bit different than if we only had a handful of domestic carriers. Due to the number of companies domiciled in Iowa, we must have a technical skill set and ability to completely understand the all facets of the industry.

Level-setting: What are the goals of the office of the insurance commissioner?

First and foremost, the goal is to protect the consumer. You do that through monitoring a company’s solvency and financial status. You also make sure that companies are following rules and regulations and all the laws on the books.

A lot of folks don’t recognize how complex that regulatory framework is, so you really spend your time not only on financial solvency but also on the market side, making sure that rules are followed.

See also: Time to Revisit State-Based Regulation?  

Even if a state has fewer companies domiciled, is it still interested in solvency? Or is this outsourced to the state of domicile?

That’s a good question. There are two sides – the financial side and the market side. On the financial side, there’s great deference to the lead state. For instance, if you are the lead state regulator of a group that is doing business in multiple states, there will be great deference to that regulator and his or her team that is reviewing those financials and that file. Any regulator can check and have their own views, obviously. But, there’s going to be great deference to that lead state.

Is this the same for market conduct?

On the market side, there’s not nearly as much deference. In fact, while I was commissioner, the NAIC was undertaking an accreditation standard for the market side. On the financial side, every state is accredited by the NAIC. And through this process, there’s much more cohesiveness and deference to that lead state. That doesn’t exist as much on the market side.

So, backing up a second, I’d like to touch on the topic of state-based regulation vs. federal regulation. Is this the right way to regulate this market?

I think it’s a good thing, because it’s local. A lot of insurance is local.

The feds have done a lot of work – whether it’s CMS, the Department of Labor or Treasury – that encroaches on state insurance regulators. I submit that this encroachment creates confusion and is counterproductive. I personally do not believe a federal regulator is going to do a better job and, in fact, believe it would lead to poorer results and hurt consumers. In my opinion, the federal government did not do exemplary work during the financial crisis, and I believe insurance regulators actually performed and executed quite well during that financially stressful time. In looking at that crisis, I have concluded that I do not want federal regulators or prescriptive banking standards forced upon the insurance industry.

State insurance commissioners are either elected by the people they serve or are appointed by a governor or other official or agency head. Those are held accountable at that local level and are part of the communities they serve. On countless occasions, I was stopped by people and asked about insurance issues. It would be very difficult to get that accountability or access if insurance were regulated at a federal level.

Are there areas where the states could improve?

There are some areas: They can do a better job of working together on the market side. But that’s why the National Association of Insurance Commisioners, the NAIC, exists – to create model laws that will create more uniformity across all states. And again, the states have done a tremendous job on the financial side.

The market side has more room to improve –  at least as far as coordination. Regulators have made tremendous progress in recent years, though. In the last six years, by collaborating and coordinating through the NAIC, monumental modernization has occurred. As an example, annuity suitability, ORSA, principal-based reserving, corporate governance, credit for reinsurance and now cyber model laws have all been created and passed in numerous states. Passing a model law out of the NAIC is important because it provides a state a solid model to guide through the legislative process.

What is the downside of state regulation?

There are certainly challenges with the state-based system. One is, at the state level, having resources to do the job. The state of Iowa is really an international regulator as we’re the lead state for Transamerica/Aegon and group-wide supervisor for Principal Financial. We have firms in Iowa with significant international footprints, so Iowa regulates alongside international peers from all over the world. I believe it is critical that Iowa resource the insurance division appropriately, as limiting resources too much ultimately hurts the ability to regulate effectively.

After resources, I think the biggest challenge for states is uniformity issues. An emerging challenge is keeping up with all the technological advances and innovation emerging from the insurtech and fintech area.

Is regulation keeping up with innovation?

Whether or not the old regulatory framework is still relevant today – I believe we will soon have a debate around that and how to modernize. The use of data is going to be a challenge for regulators, whether it’s genetic testing in life insurance or some other topic. There are a lot of issues in the innovation space that regulators are going to have to step up and meet because, if consumers demand change, the answer shouldn’t necessarily be, “We can’t do that.” Maybe we need to look at the rules and the laws and make a concerted effort to modernize.

Over the years, a number of people have come into my office frustrated at the limitations of the current rules and said, “That law’s stupid.” I have to inform them that just because it is illogical doesn’t mean that you can get rid of it. That’s not the commissioner’s job. The legislature passes the laws. The commissioner interprets and enforces the laws. Commissioners do not pass the law, so, when individuals are frustrated, often that frustration is misplaced.

See also: The Coming Changes in Regulation  

All in all, you would say that state-based regulation is the better answer?

I would put the state system up against a federally based system any day.

At the same time, we are the only country, to my knowledge, that has 56 different jurisdictions regulating insurers. Every other nation has a federal one. This poses challenges for international groups; certainly, some reinsurers are facing these issues. It is for that reason that we must coordinate better and speak with a unified voice.

As I have said, I do think the state system is remarkably better for consumers. When I was commissioner, the phone number on my business card went right to my office. I talked to consumers every day who called me directly. I would answer my phone, and they would be shocked that I would answer. There is genuine appeal in that.

When something goes wrong, insurance quickly becomes very personal. Sometimes, it’s bad things happening intentionally or willfully, while other times it’s just misunderstandings. Insurance is incredibly complex. I’d much rather have a system where there is accountability at the state level. You have people working for their citizens whom they go to church with and see around the state.

That’s a much better system than a federal bureaucracy that might have 10 regional offices where it’s impersonal and you have no idea who in the heck you’re talking to.

Continued….

Q&A With Iowa’s New Commissioner

Q: Congratulations on becoming the new Iowa insurance commissioner. You’re a Missouri native with 30 years of experience in the industry. What brought you to Iowa?

A: Thank you very much. About four years ago, I met Nick Gerhart, who was beginning his tenure as Iowa’s insurance commissioner. We had really good discussions at NAIC meetings, and he needed another member for his senior leadership team. Things really just fell into place. I’ve spent my entire career in consumer protection, and I shared Nick’s values of making government work for the people we serve — in our case, the consumers of insurance products.

Another draw for me was that Iowa is a huge insurance hub. From the outside looking in, I knew that Iowa’s regulatory culture was open communication with the regulated industry. We protect consumers and have high standards for the industry we regulate, but we communicate openly. We may not always agree with insurers, but we are willing to talk about it. I feel many states don’t have that mindset. It makes a big difference to have a focus on consumers while also working with industry in a fair, flexible and positive way. Industry ultimately wants stability and to be treated fairly, and I think that is why Iowa is home to so many insurance companies.

See also: A Commissioner’s View of Innovation  

Q: How does it feel to have the title of insurance commissioner once again? Not many can say that.

A: I am confident that those insurance commissioner statistics are not kept, but in the 150 years of state insurance regulation, I may be the sixth or seventh to serve as insurance commissioner in two separate states. Perhaps I’ll be the answer to a Jeopardy question someday. I’m very pleased to have been appointed by Gov. Branstad and Lt. Gov. Reynolds so that I can continue working to help protect consumers. We have a really, really good staff here at the Iowa Insurance Division, and I consider it an honor to lead them.

Q: What’s your vision for the Iowa Insurance Division moving forward?

A: Consumer protection will be the main focus. Our multi-faceted team is in place to make sure that Iowans are protected.

We have a market regulation team that works with consumers on complaints, enforcement attorneys that ensure companies and producers who are doing what they are supposed to be doing, a fraud bureau that consists of law enforcement officers that investigate insurance fraud and a Senior Health Insurance Information Program (SHIIP) that helps Iowans on Medicare get the information they need to make informed decisions.

Another huge part of consumer protection is ensuring that the insurance companies are solvent to be able to pay claims when needed. Our financial team works hard every day so consumers are protected that way.

We also just recently launched a new website, which really puts consumers first so they can quickly and easily get the information they need.

Q: There’s always talk during a new president’s term about the first 100 days and discussions about the cabinet picks. Is it the same for a new commissioner taking over?

A: Well, in my case, I’ve been appointed by the same administration that my predecessor was. On one level, much stays the same. Early on in Commissioner Gerhart’s tenure, he knew there was a crisis coming as much of our staff was retirement-eligible in the coming years. We put in a lot of work in terms of strategic hires, putting our younger staff in positions to both learn and lead and reorganizing as necessary. We’ve been able to add necessary staff to those regulating company solvency to keep up with the growing and increasingly complex nature of our domestic industry. Still, we may look to continue adding to our senior leadership, whether that be from inside Iowa or outside given the strategic plans put in place under Commissioner Gerhart. I will work with industry, our universities, Lt. Gov. Reynolds and Gov. Branstad to help make Iowa an attractive place to do business and a home for talented insurance professionals.

As for the first 100 days, I think a lot depends on what happens at the federal level in a few areas. What happens with the ACA is yet to be seen but will have a huge impact on what we do here in Iowa. The DOL fiduciary rule is also out there as something we are waiting to see how the new administration deals with. There’s also FIO, and I suppose the list could go on. We’ll continue to be active at the NAIC level to bring ideas forward and work for the best interest of Iowans.

See also: What Is the Right Innovation Process?  

Q: Iowa has generally been very forward-thinking in terms of innovation in the industry. ITL has even joined as a partner to the Global Insurance Symposium that the Iowa Insurance Division helped create. What should we expect at this year’s event?

A: The Iowa Insurance Division has been a founding partner of the Global Insurance Symposium, which is held each spring in Des Moines. This year will be the fourth year, and I think it will be the best one yet. There really is something for everyone. Many of the topics such as artificial intelligence, blockchain, corporate strategy, risk mitigation and innovation in the industry truly transcend all types of insurance. This event brings together top thought leaders in industry from around the world, industry executives, regulators and insurtech startups. I think this event is in a caliber of its own, and I’m really proud to be in a position to help the event grow and showcase all we are doing in Iowa to the rest of the insurance world.

This will be an event that folks won’t want to miss.

10 Ways to Fix Obamacare

After a Sunday church service, fellow parishioners approached me with empathy about the prospect of dealing with healthcare after Tuesday’s election. I know this is just the beginning of what state insurance regulators will face as consumers bring us an array of questions regarding the future of the Affordable Care Act (ACA).

  • Will it be repealed?
  • Will it be replaced?
  • Will it be amended?

The answer to each question is the same: No one today knows what will occur with the ACA. However, it’s important for people to understand that it will not be possible to make any changes quickly — and any changes that do occur will happen over time. This means that, because the law is still in effect today, people should take steps to obtain or maintain health coverage that meets their family’s needs.

There are mounting challenges in America’s healthcare system. It’s clear to me that we need a modern-day Manhattan Project to address healthcare — a focused initiative where the brightest minds come together to address the many deficiencies of the ACA and recommend changes to healthcare financing and delivery systems. This type of project would lead to a more affordable and ultimately sustainable healthcare system, something that the ACA was never going to provide.

See also: What Trump Means for Health System  

The ACA did not address what is driving healthcare spending. To “fix” healthcare, we must transform the entire healthcare economy with a focus on what is driving spending. Rising healthcare costs have an impact on all Americans, not just the small percentage that purchase their own coverage through the ACA. Without structural changes to our healthcare system and a focus on costs, healthcare may squeeze out all other government programs and cause employers footing a large percentage of healthcare premiums for employees to drag down wages, which stunts America’s GDP growth. President-elect Trump needs to take a holistic look at healthcare. The ACA should be his starting point as it is currently on life support and needs changes as soon as possible.

If the new Congress passes a bill to repeal all of the ACA, I hope that a replacement for the ACA is stapled to that bill. An immediate repeal would lead to devastating consequences in the disruption of people’s care and would create even more uncertainty for millions of Americans. To ease the uncertainty, a transition time is required for any whole or partial suggested change.

To offer immediate predictability, President-elect Trump could consider keeping transitional (grandmothered) plans in place for another 24 months. At least one state has requested CMS to allow for an extension of the transitional plans because of a severe lack of choice in the market in that state. The request was rejected. Millions of Americans are in grandmothered and grandfathered plans that they like and that are working for them. President Obama allowed the transitional plans to continue, and the new administration should consider keeping the individual and small group transitional plans. In Iowa, we have nearly 117,000 people in these plans today.

To be clear, there are no easy fixes. The existence and reach of the ACA are contentious issues. Issues related to the ACA have been litigated in court and evaluated by public opinion for years now. Some parts of the ACA have merit and should be kept, in my opinion, but, on a whole, with skyrocketing premiums and insurers leaving markets, it is clear the ACA needs a lot of work. To make the individual insurance market work, it is imperative to build sustainable risk pools for individuals.

Rates for 2017 are rising 25%, on average. Affordability is a major issue for Iowans purchasing their own coverage. Premium tax credits may offset and assist with affordability for those who qualify. However, for the nearly 125,000 Iowans who are above 400% of the federal poverty level that did not have access to employer coverage prior to the ACA, affordability is a major issue. The ACA exempts certain people from the requirements of the individual mandate. One of the exemptions is an affordability hardship exemption. If a person cannot secure health insurance for less than 8.16% of their modified adjusted gross income for 2017, they may qualify for the hardship exemption. This would be net of any premium tax credits. Therefore, a significant number of people will be able to “opt out” of the ACA’s insurance mandate today; as the rates continue to rise, however, those individuals will not have health insurance coverage.

Many have stated that the ACA took a sledgehammer to healthcare when it was more appropriate to use a scalpel. Healthcare issues differ by state, but no matter what tool is needed to improve access to healthcare, it is clear that a number of changes should be considered immediately to help ensure that consumers have choices as they seek out coverage.

Ten Points to help improve the ACA:

  1. Create a mechanism for covering catastrophic claims, separate from individual insurance pools. As a parent of a child with Type 1 diabetes, I am grateful that the ACA eliminates pre-existing conditions. I know that if I ever need to buy my own insurance, I can find coverage that will still be meaningful for my family. However, it is clear that the most chronic and catastrophic conditions are the drivers for an extraordinary amount of the rate increases. In testimony I provided before Congress, I stated that looking at high-risk pools for catastrophic claims (defined as claims that cost over a certain amount) has merit. These high-risk pools could be state-funded pools like many states had before the ACA, or it could be a large federal pool. If we can keep the most expensive claims out of the individual risk pool — while still providing coverage to those families — it will lead to predictability in pricing. In Iowa, one claimant is driving nearly 10% of the 2017 rate increase for one of the companies offering coverage to Iowans. That family needs coverage but, if the coverage was provided through a mechanism where the costs are spread to society in general and not to the small pool of individuals using a single insurance company, costs for individual health insurance could be kept more manageable and predictable.
  2. Eliminate the mandate. Instead, allow people to enroll in health insurance only once every two or three years, unless they have a proven special enrollment event. Let companies validate the special enrollment with an appeal available to a third party or the state department of insurance.
  3. Shorten the grace periods to 30 days. There are stories all over the country with people gaming the lengthy grace periods.
  4. Abandon metal tiers. There are no platinum plans in Iowa and few gold plans. Look at better ways to judge and compare plans.
  5. Review the need for prescriptive essential health benefits. Require carriers to have two or three standard plans, similar to how Medicare Supplement plans are standardized. Then carriers could also design and offer non-standard plans.
  6. Move the age band back to 5:1. At 3:1, the younger, healthy people feel penalized and are priced out of the market. Getting younger people into the pool will stabilize the rates for everyone.
  7. Encourage innovation in the market. Encouraging innovation with limited underwriting rewards healthy people, similarly to how lower-income folks are given incentives through tax credits. Allow consumers to be rewarded with healthy behaviors, and allow companies to innovate on product design.
  8. Look at health savings accounts as a means to increase consumers’ pricing awareness. If this is adopted widely, look at ways to fund health savings accounts for certain lower-income Americans.
  9. Publish healthcare prices and create objective quality benchmarks and metrics for consumers to review. This will help inform consumers about price and quality. In the current market, individuals have no clue what healthcare-related procedures and items will cost us. We are more price-aware buying a refrigerator than we are when having a heart procedure. That needs to change.
  10. Fix the 3 Rs. Abandon risk adjustment and risk corridor and continue a public reinsurance option.

Much has been written about selling insurance across state lines. I do not see that as a major factor to help drive down costs. Those insurers that would sell across state lines would have to comply with applicable state mandates and would still have to build a network of doctors for competitive pricing. New companies can enter states today with ease, and many companies sell in multiple states. The issue is the cost to contract with doctors in those states. More competition in insurance sounds good, but if those carriers cannot get enough scale to get competitive pricing arrangements with providers, they will be priced out of the market.

See also: What Trump Means for Best Practices  

This is hardly an exhaustive list, but we need to start somewhere. Many more things must be reviewed in the healthcare economy, such as the cost of prescription drugs, emerging technologies and end-of-life care. However, looking at the financing of healthcare and insurance is the logical place to start — money always is front and center. My hope is that reasonable people come together to address this challenge.

What Will Trump Mean for State Regulation?

Insurance is regulated by states, and the states’ laws are implemented and administered by state insurance commissioners. This was affirmed in 1945 by the McCarran-Ferguson Act. Under that act, states regulate the business of insurance unless the U.S. Congress decides otherwise. In the past six years, the federal government has with regularity encroached on areas previously controlled solely by state insurance commissioners, such as through the following federal actions:

  • The creation by the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank) of the Federal Insurance Office (FIO)
  • Dodd-Frank’s creation of the Financial Stability Oversight Council (FSOC)
  • The Affordable Care Act (ACA)
  • The Department of Labor (DOL) fiduciary rule issued April 8, 2016

These federal encroachments have led to regulatory confusion. Although state insurance commissioners are the predominant regulator of licensed insurance carriers and producers, insurance companies that are deemed systemically important non-bank financial institutions are supervised both by the Federal Reserve and by their domestic state insurance regulators. This creates significant duplication and regulatory burden; the cost of that burden – as well as some of the confusion — is ultimately passed on to consumers. Under the ACA, for instance, state insurance regulators routinely must react to hundreds of pages of regulations that are published by the Centers for Medicare and Medicaid Services. Licensed insurance producers and carriers must overhaul their operations and distribution to comply with the 1,023-page DOL fiduciary rule.

See also: What Trump Means for Business  

As I see it, state legislatures have given state insurance regulators dual mandates: (1) to protect consumers from the moment of purchase through filing a claim and ultimately the payment or denial of that claim; and (2) to ensure companies are solvent and can meet their financial obligations to consumers. While insurance regulators at the state level can always improve, I do believe that collectively we do a commendable job. Insurance company failures are rare, and most states respond to consumer complaints in a very timely fashion.

Under a President Trump, I believe the role of state insurance regulators will grow as some federal regulations are eliminated. If Dodd-Frank is reviewed, the role of the FIO and even the FSOC could change. State regulators have argued tirelessly that the FIO is not a regulator and needs to stay in its lane as authorized under Dodd-Frank. State regulators are debating with the FIO the need for a covered agreement on reinsurance collateral and are worried about state law being preempted. I think that, under a Trump administration, state regulators may be listened to much more in this debate. State commissioners and the FSOC representatives with insurance experience have also worked to ensure that the FSOC recognize that insurance is not banking and that traditional insurance is not systemic to the global financial system. A Trump administration may agree with state insurance regulators on these issues and many more. Only time will tell, of course.

State insurance commissioners need to demonstrate through the execution of states’ dual mandates that we deserve the responsibility of supervising the insurance markets in our respective states and that we do it better than it could be done from the federal level. I believe the time for state insurance commissioners to shine is now, and I hope we all continue to deliver results as our roles as the regulators of insurance carriers and producers and as the protectors of consumers become increasingly important.

See also: What Trump Means for Workplace Wellness