This year has proven to be another extremely busy year for state and federal legislators and regulators and, of course, for the greatly impacted insurance industry. More than ever before, managing regulatory change has never been more critical to the insurance industry. With calls for more consumer protection and financial transparency across all lines; timeframes set by Dodd-Frank for annuities suitability and surplus lines reforms in the states; as well as the frequently conflicting concerns of federal health care reform and cost control versus an increasing demand for mandated benefits—it’s no wonder that insurers are bearing a significant regulatory management burden.
During the first half of 2011, state legislatures and Congress have introduced over 10,000 bills affecting the insurance industry. And while introduced volume is certainly indicative of impending industry challenges, it is interesting to note that through June 30th, nearly 14,000 statutes, regulations and bulletins were newly created, revised or issued. This volume stretched across all jurisdictions, with a definite promise of more to come before this year ends. At this pace of activity, we are on track to witness well over 20,000 insurance industry citations being affected this year through legislative and regulatory mandates. This data not only shows that 2011 is proving to be a banner year, but also illustrates that staying on top of legislative and regulatory activity is a challenge that continues to grow. And the insurance industry is recognizing the need to manage this volume in order to minimize risk of noncompliance.
Numbers can certainly speak volumes, but just what areas of the insurance industry have felt the burden so far this year? For property and casualty insurers, many states have taken steps to protect those individuals affected by the current financial crisis, with requirements based on NCOIL’s July 2009 Credit Scoring Model revision. Insurers are required to provide an exemption from “rates, rating classifications, company or tier placement, or underwriting rules or guidelines” to individuals who have filed written requests by defining extraordinary life circumstances as events including serious illness or injury; death of a spouse, child or parent; divorce; identity theft; temporary loss of employment; or military deployment. States either adopting this type of consumer protection or enhancing existing requirements include Montana, Nevada and Rhode Island, continuing the trend we saw last year with Connecticut, Iowa, Kansas and New Hampshire. Other areas of the law impacted this year are found in cancellation and nonrenewal provisions, limitations on liability, statutes of limitation and certificates of insurance. And, of course, we must recognize the various state efforts in complying with the Nonadmitted and Reinsurance Reform Act (NRRA) in establishing surplus lines provisions consistent with the reform provisions in that portion of the Dodd-Frank Act. Effective July 21, 2011, an insured’s home state will be the only state with jurisdiction over multistate surplus lines transactions and the only state that can require a tax be paid by the broker. Through mid-July, 43 states have enacted legislation bringing their jurisdictions into compliance with the NRRA.
For compliance professionals involved in life and health, states have been adopting new requirements for retained asset accounts as a settlement option in life insurance and rolling out Model 275 changes in annuities suitability requirements. “All things health” for health insurers this year are not solely related to federal health care reform, although the number of legislative and regulatory actions relating to the Affordable Care Act (ACA) have certainly occupied a significant position on states’ agendas. From health insurance exchange enabling legislation to conforming amendments for many aspects of ACA, including expanded health rate authority, the landscape is changing. However, state-mandated benefits—including autism spectrum disorder, oral chemotherapy, telemedicine and leukocyte antigen testing—continue to make their mark in individual states.
With the promise of more legislative and regulatory activity to come over the remaining months of 2011, we will certainly continue to see all lines of business affected by these changes. And, of course, the challenges of managing both the volume of activity and all the required process implementation changes will continue to impact the industry.
