Regulatory Roundup

Topping regulatory news this week was the Senate’s passage of H.R. 4173, the Dodd-Frank bill, and the reaction of insurance trade groups.

“Life insurers appreciate the creation of a Federal Insurance Office which will, for the first time, establish a team of insurance experts at the Treasury Department to advise policymakers in the administration and Congress on insurance-related issues,” says the American Council of Life Insurers, Washington. “The FIO will also assist federal officials in international insurance regulatory negotiations.”

The ACLI adds that “The impact of other major provisions in the Dodd-Frank bill—including those affecting derivatives, standard of care and systemic risk—on life insurers and consumers cannot be fully assessed until the relevant federal regulatory agencies complete the rulemaking process.”

The American Insurance Association, Washington, said of the legislation that will now go President Barack Obama’s desk for his signature, “The bill passed today largely recognizes that property and casualty insurers do not pose systemic risk. This meaningful acknowledgment is a victory for the many policyholders that rely upon our low-risk business model to provide them security in times of uncertainty. The bill also takes necessary steps to prevent insurers from being lumped into many of the new “bank-focused” provisions. This, too, is a substantial recognition of the insurance business model.”

AIA goes on to say that with 250 new regulations to be implemented by 11 different federal agencies, the “intense rulemaking process” will be AIA’s top priority. AIA said that its focus will remain on identifying how the insurance and banking markets are different.

AIA says that the FIO proposal “will increase the federal government’s capacity to address insurance related issues and will make a substantial contribution toward broadening and deepening our nation’s understanding of the critical role of insurance in our financial system.”

Separately, AIA urged the House of Representatives to pass H.R. 5114, legislation that would extend the National Flood Insurance Program for five years stressing that recent lapses in the NFIP due to short-term extensions have caused disruptions to disruptions to homeowners, businesses and hindered real estate closings nationwide.

On the Dodd-Frank bill, the National Association of Mutual Insurance Companies, Indianapolis, said that “…the final version of this bill does not impose onerous new federal or dual regulation on the property/casualty insurance industry.”

NAMIC said that it remained concerned with the bill as a whole but also “recognizes that the property/casualty insurance industry is unique among financial services and recognizes the prudent management of p/c insurance companies – particularly mutual insurance companies – and the performance of the states in protecting consumers and ensuring solvency since the financial crisis began.”

On the FIO, NAMIC said that it will continue to monitor its development to make sure that it remains true to its initial intent: “to provide information and expertise about the insurance industry to policymakers.”

On the NFIP bill, NAMIC expressed disappointment that the original bill was changed by an amendment offered by Rep. Gene Taylor, D-Miss., which it says added “bureaucratic hurdles to writing coverage and the claims process.” The disappointment over the measure was echoed by AIA.

According to NAMIC, the original bill sponsored by Rep. Maxine Waters, D-Calif., “would have phased in actuarially sound rates and increasing coverage limits. Rep. Waters’ bill also gradually introduced the use of updated flood maps to help homeowners who find themselves in a flood zone adjust their budgets to include flood insurance premiums.”

On the state level, the National Association of Insurance Commissioners, Kansas City, Mo., released its 23rd edition of the Insurance Department Resources Report which was developed through a survey of states and includes information such as:

• Premiums increased by 9.9 percent to $1.8 trillion from 2008 to 2009.
• In 2008, the five states with the most premiums written in all lines were California, New York, Florida, Texas and Pennsylvania. These five states accounted for 42.9 percent of all insurance premiums in the United States.
• There were 7,869 domestic U.S. insurers in 2009.
State insurance departments received more than 322,000 official complaints and 2.4 million inquiries.

And, the NAIC’s PPACA actuarial subgroup of the Accident and Health Working Group continues its work on developing standards to implement the Patient Protection and Affordable Care Act, under the direction of Alabama regulator Steve Ostlund.

This week, the subgroup discussed a meeting with the commissioners in which Ostlund said that support for the subgroup’s work was offered and that the subgroup was asked to continue in its efforts.

The subgroup continued work on several issue resolution documents (IRDs) including: IRD 070 which addresses premium discounts and rebates for wellness programs.

Regulators said that care needed to be taken not to double count discounts in the rate calculation. Minnesota regulator Julia Philips said that it is problematic to show discounts for premium wellness programs, an issue she said was not part of the subgroup’s charge. Oklahoma regulator Frank Stone agreed, asking how regulators would break out smoker/non-smoker related wellness programs.

The discussion then continued on IRDs 015 and 035 in which South Carolina regulator Leslie Jones discussed a response from an interested party about how to deal with capitation plans. The discussion among regulators focused on whether there was sufficient information before adopting the IRDs. The discussion weighed whether fee-for service plans would be disadvantaged. Regulators leaned toward monitoring the development of the capitation market but not taking action at this time.