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.In most states, insurers can offset such assessments against premiumtaxes payable to the states (some industry critics point out that such offsets amount to ataxpayer subsidy).The insurers licensed in a particular state constitute the guarantee fund inthat state under the supervision of a board of directors and, ultimately, the state s insuranceregulator.The various state guarantee funds coordinate their work, especially with regard tomulti-state insolvencies, through two private national organizations, the NationalOrganization of Life and Health Insurance Guaranty Association and the NationalConference of Insurance Guaranty Funds, of which all state guarantee funds are members.Consumer ProtectionEven though the NAIC s Accreditation Program has succeeded in making solvencyregulation somewhat more uniform and effective, achieving uniformity in other stateregulatory functions, such as in the areas of consumer protection or market regulation, hasfailed.These areas include regulation focusing on insurer practices, independent of solvencyconcerns, which might be detrimental to policyholders, such as deceptive advertising,unfair policy terms, or discriminatory or unfair treatment.Licensing of InsurersIn the area of company licensing, insurers must receive a license from each state inwhich they plan to do business.The filing requirements for licenses vary significantlyfrom state to state, and companies must ascertain and comply with each of those requirements.58 Martin T.Bannister (Editor)Each state requires that in order to be licensed an insurer must possess a certain minimum levelof capital and policyholder surplus, or net worth, which can be relatively small in somestates and quite substantial in others.The insurance regulator also must review the fitness andcompetence of the insurer s management and board of directors, as well as its business plan,product lines, and market conduct practices and procedures.The NAIC has made someprogress in its efforts to streamline the state licensing system, but much remains to be done.Licensing of ProducersLicensing of sales personnel is also subject to divergent state requirements.All statesrequire that those who wish to sell insurance within their borders must obtain a license.The licensing process typically requires passing an examination, background checks, and, insome states, fingerprinting.The GLB Act s provisions to establish a federalpreemptive sales force licensing system, the NARAB, if at least a majority of the statesfailed to develop a more unified system within three years of the GLB Act s enactment,compelled the streamlining of the multi-state licensing of insurance sales personnel.To bemore precise, at least a majority of the states had to enact either  uniform laws and regulationsgoverning the licensure of individuals and entities authorized to sell and solicit thepurchase of insurance or  reciprocity laws and regulation governing the licensure ofnonresident individuals and entities authorized to sell and solicit insurance. [19]Although unable to meet the  uniform test, twenty-six states, a majority, adopted thenecessary laws and reciprocity arrangements to meet the  reciprocity test, and thusprevented the triggering of NARAB.Since successfully preventing the triggering ofNARAB by meeting the reciprocity statutory requirement, states have failed to achieveuniformity in licensing standards.Form RegulationForm approval is the system or process by which state insurance regulators reviewand approve (or disapprove) policy forms (i.e., the terms and conditions of the contract ofinsurance) used by life insurers and property and casualty insurers for compliance with statelaws and to protect consumers.Life insurers perceive that their financial institution competitorswith similar financial products can market their new products in less than two months dueto their federal-based or dual regulator, whereas it takes insurers up to two years or moreto get their new products approved in enough states to mount a national product roll-out.Insurance policy form approval regulation varies widely from state to state.Most statesrequire product approval prior to market introduction (as noted in the second and third listedcategories below).Those states justify such prior approval requirements because of thecomplexity and technical nature of insurance contracts, which makes them difficult forthe average consumer to understand.At least seven categories of state policy formsystems exist in the various states:" State-adopted forms - required to be used by insurers;" Strict prior approval - cannot be used without affirmative approval;" Prior approval - an express standard that the form is  deemed approved after the elapseof a specified waiting period, unless specifically disapproved;" File and use - must be filed on or before the proposed effective date;History of the Current Regulatory Framework 59" Use and file - may use prior to filing, but must be filed in required number of days fromeffective date;" Form filing only - must be filed with no time period specified; and" No form filing required.The NAIC attempted to achieve a higher degree of uniformity and efficiency in formapproval by creating the Coordinated Advertising, Rate and Form Review Authority( Review Authority ) to provide a centralized review of certain life insurance productsbased on a set of uniform standards.However, the states have not used the ReviewAuthority due to the standards being riddled with deviations.In 2002 the NAIC considered the possibility of using uniform national standards as a wayto institute more  speed to market by establishing an interstate compact to facilitate asingle point of filing for certain insurance products such as life, disability, long-term care, andannuities.As a result, in 2003 the NAIC endorsed a draft Interstate Insurance ProductRegulation Compact ( the Compact ).By 2006, the required twenty-six states had joinedthe Compact, allowing it to become operational through its Interstate Insurance ProductRegulation Commission ( the Product Regulation Commission ).Thirty-one states nowhave adopted the Compact and, in July 2007, the Product Regulation Commissionapproved its first insurance product filings, all of which were life insurance products.Whetherthe Compact will ultimately succeed in providing the needed  speed to market is stillunclear.Rate Regulation and Price ControlsThe term  price controls frequently describes state regulation of rates used byproperty and casualty insurers licensed or admitted in a state (the  licensed or admittedmarket ).The price controls issue is considered to be a property and casualty industryproblem, as life insurance products are not subject to price controls.The licensed oradmitted property and casualty market provides the bulk of commercial property andcasualty insurance in the United States, focusing mostly on standard insurance policies in termsof types and sizes of covered risks.Some common types of property and casualty insuranceprovided by the licensed or admitted market include fire, burglary, theft, workerscompensation, and commercial automobile.States generally do not formulate mandatory rates for their licensed insurers [ Pobierz całość w formacie PDF ]