Spinning Wheels

The process of creating model acts and regulations at the National Association of Insurance Commissioners has often seemed to be the regulatory equivalent of sausage-making. And until recently, this happened on full public display, no less.

But I believe it was Bismarck who famously remarked that the 2 things you didn't want to see being made were legislation and sausages. How right the old Prussian autocrat was.

The question is: Once you've seen it being made, do you want to eat it; or in the case of model legislation, pass it?

Well, now it seems we have the answer, at least as far as the NAIC models go. And that answer seems to be, "I'll forgo the sausage, but would you mind passing the grits?"

I was more than a little astonished when I read the statistic in one of Jim Connolly's reportings on the NAIC that since 1996, only 3 of 35 adopted models have been enacted in a uniform manner in more than half–that is, in 26–of the states. This was according to an NAIC staff person.

When you consider how much energy, anger and adrenaline have been expended on so many of these models and how relatively little they have been implemented, it can't help but bring to mind Macbeth's remark about "sound and fury signifying nothing." But I don't want to be unfair, so perhaps Shakespeare wouldn't mind if in this case we changed it to "signifying not much."

Actually, the brouhaha that has gone on for a couple of years over amending the Viatical Settlements model act is a case in point. The battles have been fierce, pitting the settlement business against life insurers and, often, regulators themselves. In particular, the settlement business was up in arms over the latest iteration of the model, where amendments were approved during a teleconference of regulators (a far cry from the former public display of sausage-making).

Yet one wonders what will come of this if and when it is adopted by the NAIC executive and plenary. NCOIL, the National Conference of Insurance Legislators, has been pretty pointed in telling NAIC to hold off on the model because it had some major concerns and wanted time to study them.

Meanwhile, the NAIC, acting as if it is in a vacuum, is charging full speed ahead. The fact is that NAIC can adopt any number of model acts, but it is the state legislatures that have to pass them. And the sorry tale of that statistic mentioned above–3 out of 35–is that a lot of the states don't seem to be interested in a lot of the models.

So, the question presents itself: What is the NAIC doing? Far be it from me to assume that the organization is simply spinning its wheels in the manufacture of new models.

Yet, an inkling that this may indeed be the case can be construed from a proposal being floated that a vote of two-thirds of commissioners would be required in order to pass model laws. And further, commissioners would be required to make a commitment to get the model adopted in their state if they voted to pass it.

The two-thirds majority is an excellent idea. Short of demanding a blood oath, however, I have some problems trying to figure out how commissioners would be "required" to make a commitment. And considering the speed with which some of our regulators fly through the revolving door, does the commitment of one regulator apply to his or her successor?

Spinning one's wheels is not salutary for any type of organization, whether it manufactures physical goods, software or regulations.

Indeed, it's a prescription for not getting anywhere at all. Just ask anyone who's been following General Motors' decades-long sorry example.

Steve Piontek

Editor-in-Chief