Former Commissioners Weigh In On Federal Standards

Koken argued that past efforts to preempt state insurance regulatory authority, such as efforts to give the federal government control over the National Flood Insurance Program and the Employee Retirement Income Security Act, have hurt lawmakers' constituents.

"Marketing life insurance is an area where we agree with industry that greater uniformity is needed," Koken said. "Where appropriate, NAIC and the states are working to achieve full regulatory uniformity to benefit both consumers and insurance providers."

Koken talked about NAIC efforts to increase uniformity by developing an interstate regulatory compact.

Koken said the number of states in the in the compact will soon grow to 17 and that those states represent about 23% of U.S. insurance premium volume. She estimated that the compact will become operational in 2006, calling it a "remarkable achievement, considering the general rule of thumb for compacts is that it takes anywhere from 7 to 10 years to get them from the planning stage to becoming operational."

Covington and Mike Pickens of Arkansas, a former NAIC president, disagreed with Koken's comments about preemption.

Covington said gives states an SMART opportunity to maintain a state based regulatory system with needed reforms.

"While some may object to the preemption provisions, which should only be used as a last resort, the question exists as to what other options do policymakers have if the states cannot institute the agreed upon reform initiatives," Covington said.

Pickens said he is a strong supporter of state insurance regulation and is opposed to federal preemption of state insurance laws.

"But, significantly, preemption need never occur under the SMART proposal," Pickens said. "SMART does not use 'preemption,' but, rather, the 'threat of preemption,' to help state regulators overcome the political and other obstacles that exist in some states, so that they can in fact implement, enforce and continue to regulate their promised reforms."

Greg Serio, former New York insurance commissioner, sought to bridge the gap between the NAIC and the committee by urging everyone to work together.

"Maintaining the long-term perspective of preserving the state-based system of insurance regulation–not simply because it has been the historical method of regulation but because it is the system best-suited to meet the demands of a changing world–will be all the motivation that regulators need to understand and embrace the give-and-take of the SMART deliberative process," Serio said.

Serio said uniformity of laws and regulation will allow the state-based system of regulation to become more effective and efficient in its enforcement of the law, just as national self-regulatory mechanisms in the securities industry have helped state securities regulators.

Organizations such as the Insurance Marketplace Standards Association, Washington, "have shown that self-regulatory bodies can thrive in insurance, and even achieve regulatory efficiencies for its companies," Serio said.