I have observed and participated in the NAIC and written frequently about its role in insurance public policy for nearly 50 years. To say that the NAIC is vital to the system and success of state insurance regulation is an understatement, and today more than ever it must be tightly woven into the fabric of state regulation and not be a self-controlled, subordinated appendage as it is now.
From time to time over the years, the behavior and conduct of the NAIC as an organization has been called into question by its members, state legislators, insurers and others. Most recently, one of its members has called into question its governance practices. To fix such recurring issues and distractions, I believe the organizing principles for the NAIC must be set forth in state law. Most importantly, such a change will allow state regulation to survive and overcome the powerful forces at work nationally and internationally seeking to move regulation of the insurance industry to Washington, D.C.
Over the last 25 years or so, the resources, activities and functions of the NAIC have substantially changed. Its staff has grown from about 25 to well over 400. The scope of its activities has gone from national to international. It views itself as a standard-setting organization and not just a developer of model regulations. Many of its pronouncements have the force of law in most — if not all — states. Through the accreditation program, it has obtained substantial leverage to enforce its desires on the states. It exerts substantial influence over the resolution of insurers encountering financial or marketplace problems.
All of this has occurred without state legislative direction or input. Without a doubt these substantial changes would not have occurred without the financial resources the organization derives through provisions of state law. Today, the NAIC has a surplus of about $100 million as compared with the 1960s and 1970s when the NAIC broke even on an annual basis. In our American system, an organization with such importance and influence over private activities demands control and oversight set by law.