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NCOIL Blasts NAIC For Holding Meetings in Secret

In a strongly worded letter, National Conference of Insurance Legislators Vice President Brian Kennedy (R.I.) again communicated his concern to the National Association of Insurance...
May 8, 2007

 PIA Resolution Urges NAIC to Conduct Meetings in the Open

In a strongly worded letter, National Conference of Insurance Legislators Vice President Brian Kennedy (R.I.) again communicated his concern to the National Association of Insurance Commissioners (NAIC) regarding its open meetings policy. In a letter to NAIC President Walter A. Bell, Kennedy said that the NAIC is "abusing the use and purposes of Executive sessions." He stressed the sessions are not in line with those authorized by state Open Meetings Laws, that allow for closed discussions of pending litigation, trade secrets, and character and competence.

While attending several recent NAIC conferences in his role as an NCOIL officer, Rep. Kennedy said he found unwarranted closing of meetings to be a common practice and expressed his apprehension regarding the process at the NAIC Spring Meeting, and subsequently to Commissioner Bell in two letters.

In a letter responding to Rep. Kennedy, NAIC President Bell said, "Nonprofit organizations, such as the NAIC, which support or assist governmental entities with their work, are not subject to Open Meetings Laws. When individual insurance commissioners gather as members of the NAIC, they are not considered a governmental entity or public body as defined by the various Open Meetings laws, but rather are a private group. As an organization, the NAIC does not have any regulatory authority."

In a response back to Bell, Kennedy said, "It would appear that you will continue to operate the NAIC in a surreptitious manner behind closed doors. It is ironic that my letter to you sought a simple change to your meeting practices, but you have provided new fodder that would indicate that perhaps the conduct of an NAIC meeting is only the tip of the iceberg, and that the NAIC may be far exceeding their authority as an organization to collect fees or enforce regulations that they promulgate."

Broker Activities Task Force

The criticisms by NCOIL's Kennedy expand on a critique by PIA National, which center specifically on secret sessions by the NAIC's Broker Activities Task Force. That the NAIC task force has supposedly been working to enhance transparency by meeting behind closed doors is an irony that, until Rep. Kennedy forced the issue, had gone unaddressed.

The Broker Activities Task Force had been meeting in secret leading up to their March 20, 2006 press release announcing the results of settlement negotiations involving several state attorneys general regarding alleged bid rigging by a few large brokerage firms. Michael T. McRaith, Director of the Illinois Division of Insurance and Chairman of the Task Force, said at the time, "These efforts have resulted in an agreement that prioritizes consumer protection with sensible business reforms."

There's just one problem: the full NAIC has never openly debated or adopted this as a strategy.

Further troubling is that the NAIC is trumpeting this "policy" on broker activities through a Task Force that is completely at odds with a less-restrictive proposed model policy that was approved by the NAIC Board on a split vote, but then never adopted by any state. As of March 2007, this model was still listed on the NAIC website with no indication that it had been rejected by every state.

One is led to suspect that the reason for all this secrecy is that the NAIC Broker Activities Task Force is trying to advance an even more restrictive policy goal through the settlement process, because they could not get it done through state legislatures.

PIA Resolution

The PIA National Board of Directors, meeting on April 1, 2007, unanimously passed a resolution calling on the NAIC to adhere to its own policy on open meetings. The PIA resolution states in part, "NAIC's stated policy is to conduct its business openly, but increasingly, NAIC meetings are taking place in entirely closed sessions, leaving the regulated population unaware of what was discussed, even though the decisions made by NAIC members have profound effects on insurance industry participants and consumers."

"We do not think you have anything to hide and therefore open meetings are the best way for you to conduct business whenever possible," a PIA letter to NAIC President Walter A. Bell states. "We value our relationship with the NAIC and believe it is a productive one.  By shutting the public out, though, the NAIC is needlessly fostering the perception that you have something to hide. We hate to see this type of behavior spoil all the good work being done."

"We ask you to ensure that the NAIC lives up to your open meetings policy by directing the various committees to meet openly whenever possible and rarely, if ever, in an entirely closed session," the PIA letter concluded.

While PIA believes that the best way to resolve this dispute is for the NAIC to adhere to the spirit of its own policy on transparency, NCOIL is preparing for a fight.  In an interview with the National Underwriter, Rep. Kennedy said, "This is not a subject that is going to be dropped. Some legislators are planning to approach their states' attorneys general and ask them to look into the matter."

NCOIL, NAIC Spar Over Sunshine Laws (National Underwriter 4/4/07)

NCOIL Vice President Brian Kennedy letter to NAIC President Walter A. Bell (3/20/07, large PDF file)

NAIC President Walter A. Bell's response to Rep. Kennedy (4/9/07, large PDF file)

Rep. Brian Kennedy's response to Commissioner Bell (4/30/07, PDF file)

NCOIL Press Release (5/4/07)

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