Tag Archives: insurance commissioner

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.

Letter to Congress on Replacing ACA

Dear Majority Leader McCarthy,

I offer the following comments and recommendations in response to your letter dated Dec. 2, 2016, as the House of Representatives moves forward with the repeal of the Affordable Care Act and offers meaningful healthcare policy suggestions that place the best interests of the consumer and the market ahead of continued government marketplace meddling.

As the Oklahoma Insurance Department surveys the private individual health insurance market in Oklahoma, it is apparent that consumers, insurers and providers are in a combined state of distress. We see the expected marketplace failings, because of government intervention, of limited competition and consumer choice in both benefit plans and provider networks that have led to ever-increasing premium costs. Consumer confusion and dissatisfaction is prevalent and is shared by other marketplace stakeholders.

It is time we start thinking differently and move toward more innovative solutions that are working in other countries. We don’t know what health insurance is going to look like in 10, 15 or 30 years. We have to start putting the processes in place at the state level to allow for real innovation in this sector, one that has been totally hampered by government intervention for decades. To that end, one thing that has recently come to our attention that we think would be of interest to everyone is contained in the attached memo [at the bottom of this article] from Dr. David M. Dror, chairman of the Micro Insurance Academy and executive chairman at Social Re Consulting (pvt) Ltd. The memo focuses specifically on “health insurance to the uninsured and lessons from delivering microinsurance in low-income settings in India, Asia and Africa.” This memo is an example of innovative thinking that we need to consider for certain microsegments of the population in the U.S. We need to look for new solutions similar to microinsurance that have yet to be considered in the U.S. but that are working in other countries.

The current landscape presents us with a real opportunity to examine the principles on which we want to base our health insurance markets. For far too long, health insurance has drifted away from traditional insurance concepts (like fortuity) and has turned into a cost-sharing program instead. It is no wonder that health insurance premiums are spiraling out of control when every health insurance policy is required to pay for a very costly menu of benefits without regard to preexisting conditions. Health insurers should be allowed to underwrite for fortuitous risk and should not be forced to assume known chronic claims. Imagine how much we would pay for auto insurance if the policy was required to pay for all damage occurring over the life of the vehicle and even before the coverage was effective.

We have in front of us now a chance to reject this creeping sentiment that health insurance is an entitlement rather than an insurance product.

For the nearly 300,000 eligible Oklahomans who look to the individual market for coverage — including many of the citizens of tribal governments — Congress must take action that (a) stabilizes the marketplace for policy year 2018; (b) returns to the states the flexibility to self-determine the scope and depth of insurance coverages that best serve the citizens; and (c) restores the regulatory authority to state insurance departments that protects consumer interests and enables issuers to deliver value-based, affordable policies that best serve their constituents. 

See also: Obamacare: Where Do We Stand Today?  

A free market, grounded in fair and limited regulatory oversight — which is predicated on constitutional freedoms and rights — presents the best possibility of delivering sustainable access and affordability in this marketplace going forward. As we move forward, a properly designed policy must target improvement of health outcomes along with control of healthcare costs, reduction of administrative and regulatory burdens and advanced system sustainability.

Marketplace Stabilization

Vice President Mike Pence and Speaker of the House Paul Ryan recently discussed their intentions to have a “smooth transition” to stabilize the health market. Their approach will marry the White House’s planned executive orders with legislative approaches to stabilize the market as our country begins to repeal and/or replace the disastrous ACA. This approach, formulated and led by Congress and the White House, will be difficult. The states stand ready to do their part to ensure the transition is as smooth as possible. Promises by the federal government under the Democrats’ control have placed this country on a very dangerous path that will take time to unwind through a budget-neutral approach. Saddling this burden on the citizens without the funds to back it up is reckless and irresponsible.

There would be no more significant signal by Congress and the new administration of their intent to stabilize markets than to fulfill the payment obligations made by the federal government under the ACA Risk Corridor program utilizing any existing money to avoid deficit spending. These promised safety valve payments are not bail-outs of insolvent companies but rather the fulfillment of a promise previously made to insurers. Further stabilization initiatives for carrier participation in policy year 2018 and beyond would include an immediate fix of the Special Enrollment Period (SEP) eligibility problem using robust verification and documentation criteria and waiting periods for market re-entry; repealing ACA fees (PCORI, HIT and FFM issuer fees) that will reduce consumer premiums; and providing a clear decision on how Advanced Premium Tax Credits (APTC) and the Cost Sharing Reduction (CSR) programs will be administered under a replacement program. These initiatives will mitigate market instability and future issuer exits.

Moving Forward Initiatives:

My colleagues on the regulatory and state government side will be enumerating multiple initiatives that have been identified as important components of a replacement package. The following list represents concepts and changes I believe are essential to the repair/replace effort that Congress will undertake:

  • Permit sale of insurance across state lines under state regulatory enforcement.
  • Adopt policies that expand the use of health savings accounts coupled with more affordable high-deductible health plans.
  • Repeal the federal individual and small-employer coverage mandates. Consider a meaningful continuous coverage premium discount or a surcharge and waiting period for interrupted coverage.
  • Allow states to pursue innovative healthcare delivery mechanisms including, telemedicine and the expansion of the technologically based Project ECHO for rural America.
  • Support transparency in pricing for medical delivery like the Surgery Center of Oklahoma has done by posting prices for elective procedures on its website.
  • A federally supported but state-administered combination reinsurance and high-risk pool program that addresses the risk management challenges of high-risk enrollees.
  • Permit employers to extend transitional “grandmother” group plans beyond the planned 2017 expiration as changes to the individual market are implemented.
  • Cap monetary damages that can be awarded in medical malpractice lawsuits.
  • Repeal rules on short-term health plans that limit policy duration.
  • Replace the 90-day premium grace period with state-based grace periods.
  • Eliminate the dual regulatory scheme currently existing at the federal and state levels. Return all regulatory authority to the states.
  • Provide flexibility through state-based innovative pathways using 1115 and 1332 waivers to create affordable health insurance coverages for the uninsured.
  • Implement market-based deadlines for submission of insurance rates and forms
  • Establish a federal initiative to sunset fee-for-service reimbursement and make the transition to value-based reimbursement payments.
  • Allow states to enact new health reforms at the grade-school level that incorporate physical fitness and nutrition programs to deter preventable illnesses.
  • Let states determine the age at which a child can remain on his or her parent’s group health plan.
  • Enact legislation that protects consumers from unfair balance billing and surprise billing.
  • Provide federal support to accelerate the interoperability of electronic health records (EHR).
  • Reform FAA rules to give states authority to regulate air ambulances.
  • Acknowledge the existence of and promote the protections surrounding religious-based medical-sharing networks similar to companies like Medi-Share, where premiums are significantly more affordable in exchange for limited network access.

See also: Is the ACA Repeal Taking Shape?  

I appreciate the opportunity to provide my thoughts on moving forward and advancing meaningful healthcare public policy. As an experienced regulator and conservative leader, I understand the challenges of balancing budgets and managing deficits. I urge the House to deliver immediate changes that will stabilize the individual market for policy year 2018 and to design long-term solutions that address competition and affordability to participants in the individual market.

The following is a briefing note from Social Re Consultancy for Mr. John D. Doak, Oklahoma insurance commissioner, on health insurance to the uninsured and lessons from delivering microinsurance in low-income settings in India, Asia and Africa. 

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