New York State Insurance Department Opening Statement Before Senate Banking Committee Hearing On The Examination And Oversight Of The Condition And Regulation Of The Insurance Industry
September 22, 2004
Opening Statement of Superintendent Gregory V. Serio
Mr. Chairman, members of the committee, thank you for offering me the opportunity to speak with you today about insurance regulation in the United States. I am Gregory Serio, Superintendent of Insurance for the State of New York, and I appear before you representing my colleagues from the states, the District of Columbia and territories comprising the National Association of Insurance Commissioners.
The power of hurricanes that recently ravaged parts of your home state, Mr. Chairman, as well as Florida, the Carolinas and the eastern United States has been no match for the power of the insurance regulatory system and insurers themselves to respond to those disasters, bringing immediate and significant financial relief to millions who have experienced unprecedented losses from an unrelenting hurricane season. The level of interstate cooperation has been significant and meaningful, bringing the two critical components of state insurance regulation consumer protection and financial solvency protection to bear for the benefit of any and all insurance consumers and companies wherever they may be.
While hurricanes and other major disasters bring to light for a few days, at least the true value of the state-based regulatory system, its benefits are reaffirmed daily. Pushing for greater uniformity and reciprocity in laws and processes when necessary and appropriate while retaining the distinctly "local" flavor of insurance regulatory oversight, the insurance commissioners have responded to the challenge of modernizing the system of state-based regulation without compromising its most important attributes. The NAICs Statement of Intent The Future of Insurance Regulation of 2000 has been followed up by an aggressive and largely successful program of regulatory modernization, highlighted by new uniform standards in agent/broker licensing, new methods of financial surveillance that focuses on risk-based analysis, greater freedoms in product form and rate approval processes and an unprecedented leveraging of technology to the benefit of insurers, agents and consumers alike. Before the end of this year, Mr. Chairman, your home state regulator, Commissioner Walter Bell, will deliver the first national standards for life insurance products which, when coupled with the NAICs tireless pursuit of an interstate compact for insurance regulation, will be the very foundation upon which insurance regulation is based for the 21st century.
The speed of reform and innovation is unprecedented but largely unheralded. For some, there is a dogged fixation on the pursuit of federal charters, on the false hope that the OFCs are quick fix to the problems as they see them. Rare is the industry commentary or consumer commentary, for that matter that the efforts made to date have fundamentally improved the state regulators responsiveness to both constituencies. From our vantage point, though, they have improved and improved notably. Where industry, consumers and regulators have sat down, at the same table, with the same objectives of improving the state-based system of regulation, great things have been accomplished.
As the NAIC continues to travel along its roadmap to insurance regulatory modernization, the insurance industry life and property companies both can greatly contribute to the improvement of insurance regulation by doing the following:
- Join with insurance regulators in the state capitals to push for passage of the NAICs interstate compact legislation. Endorsed by major state legislative groups, this legislation is crucial for giving the industry what it desires most uniformity of standards across state lines.
- Use the improved systems for product and rate approvals that have been put in place by the NAIC and individual state insurance departments around the country. While the NAIC has seen increased use of its state-based Electronic Rate and Form Filing process, SERFF has not been universally embraced by the industry as its single best electronic portal for making multi-state form and rate filings. Other speed-to-market initiatives also need greater buy-in by the industry.
- Committing to a meaningful program of self-regulation. Federal regulation has not been the "missing link" in the efforts to modernize insurance regulation. Rather, the absence of an industry-wide self-regulating mechanism, promoting the highest and best standards on corporate governance, market conduct and financial safety and soundness, represents a significant hole in the insurance regulatory construct. Meaningful and effective self-policing, closely tied to an insurance regulatory system that recognizes the value of true self-regulation, will go a very long way to fostering uniformity and improving relations between regulators and the regulated. The Insurance Marketplace Standards Association, led by a former regulator known for his progressive approach to regulation, holds this kind of promise, and its work is already being integrated into the regulatory processes of New York and Texas.
The state insurance regulators appreciate the interest of the Committee in insurance regulation, and look forward to further discussion of these issues. Thank you.