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NAIC Holds Symposium in Washington, D.C.

The National Association of Insurance Commissioners (NAIC) held a public policy forum in Washington, D.C. February 23 and 24. There was discussion of state...
March 10, 2004

By Ellen Sanders
Assistant Vice President, Regulatory Affairs
PIA National

The National Association of Insurance Commissioners (NAIC) held a public policy forum in Washington, D.C. February 23 and 24. There was discussion of state regulatory options to ensure insurer solvency and preserving the state guaranty association system. The primary emphasis was on the need to reform the existing systems.

NAIC's Risk Assessment Working Group recommended that the current regulatory process be modified. The working group is advancing a risk-focused surveillance framework which would include risk-focused examinations, off-site risk-focused financial analysis, review of internal and external changes, development of a standard prioritization system, and preparation of a supervisory plan.

The NAIC expects that the new framework would give regulators a more qualitative profile of each insurer, so that regulators could identify potential problems earlier. Mike Pickens, Arkansas Commissioner and NAIC Immediate Past President, offered the view that NAIC needs to change how it looks at receiverships.

As NAIC President and South Carolina Insurance Director Ernst Csiszar noted in his opening remarks, there have been several large insolvencies in the insurance sector (such as Reliance), as well as in other parts of the markets (such as Enron). To date, Congress has been focusing attention on non-insurance insolvencies, but is likely to turn its attention to insurer insolvencies if they continue to grow - and if the states do not revise their antiquated systems.


In early 2003 the NAIC Anti-Fraud Task Force once again picked up their previous model work product for producer premium accounts, advising that they were moving to final adoption on this. PIA objected, noting that we and CIAB had opposed that version as too onerous on producers, and that it had failed to be adopted by the full NAIC body previously.  PIA advised that if NAIC was intent on pursuing this, it should refer to and use the New York and New Hampshire laws as a working base, because these have worked well, being in place for many decades.  The June 2003 draft did that and in comments submitted to NAIC in September, PIA noted the further improvements and liberalizations needed in that draft.  NAIC agreed and on February 23 PIA and all other producer groups attended an NAIC drafting session to further refine the model.

PIA will continue to be involved in the process to ensure that any proposed model is efficient and is not burdensome on producers.

PIA Comments to NAIC on Fingerprints

A subgroup of the NAIC Producer Licensing Working Group is considering whether and how to standardize fingerprint-based background checks across the states.  Some of the issues being discussed include whether there should be a central repository for electronic fingerprint images, and how often the prints should be resubmitted to the FBI and state authorities to update the background check.

As in the past, PIA once again submitted the fingerprint policy adopted by the PIA National Board of Directors, and recommended that NAIC focus on seeking a federal solution. But should NAIC decide to pursue a state-based system, PIA urged that the fingerprint background check be required for resident agents only (with non-resident states giving deference to resident state's background check), fingerprints be stored electronically in a central repository and rechecks be done on a time schedule similar to others in the financial services industry.

Approximately a dozen states submit fingerprints to the FBI for background checks on resident applicants and would like assurance that similar background checks have been conducted by the resident states of the non-resident applicants.  Some states are equipped to handle electronic fingerprints while others still rely on cards.  Several states want to resubmit the prints to the FBI at least every five years, while others feel that such a resubmission is not worth the time and cost. 

What impact does this have on our members?  NAIC is once again trying to push for fingerprint background checks.  Ideally they would be done by the resident state only.  But if too many states lack the equipment and some are too slow in uploading the arrests, the non-resident states might refuse to honor the ones done by the resident state and could require the nonresident to have another background check. All the checks would be at the producer's cost, of course, and that could get very expensive.

Presently only law enforcement agencies can both send the prints and access the criminal history reports.  Private entities can collect the prints, but do not have legal authority to access the resulting report. Apparently there is a proposed rule that would enable states and federal governments to contract with private companies to collect the prints, access the FBI data, and make fitness-for-employment determinations. That could pose a host of problems with privacy issues, standardization of determining fitness and each of the states accepting the other states' checks done by contractors.

This issue is likely to be discussed several more times before the regulators can achieve consensus.  In the interim, NAIC leadership has pledged to renew efforts to seek a federal solution and PIA has committed to assist them to advance an equitable and efficient system.

Ellen Sanders represented PIA at the NAIC Symposium in Washington, D.C. She can be reached at

This article originally appeared in the March 2004 PIA Connection.