NAIC fall '23: Iowa regulator takes issue with DOL over proposed fiduciary rule

The National Association of Insurance Commissioners (NAIC) brought regulators from across the country together to discuss industry and economic challenges during their fall national meeting in Orlando, Fla.

The following is a roundup of meeting highlights:

Fuss over DOL rule

The US Labor Department's recently proposed fiduciary rule was the subject of intense discussion during the meeting of the Life Insurance and Annuities Committee.

The DOL's proposed retirement security rule updates the definition of an investment advice fiduciary under the Employee Retirement Income Security Act. It would also serve to lower investment "junk fees" associated with the purchase of retirement products, which were defined in remarks by President Joe Biden as fees that "companies sneak into your bill to make you pay more just because they can."

Iowa Insurance Commissioner Doug Ommen highlighted some shortcomings in the new rule and said the NAIC should submit a comment on the DOL's proposal.

"The underlying premise of this newest effort by the DOL is based on some information that's just not correct," Ommen said, "Publicly, I would express concern that in their justification for their rule they just misunderstand the annuity suitability revisions."

Although the DOL said in the justification for their rule that the federal group had met with the NAIC, that was "simply just not accurate," Ommen added.

"I would expect that we will be commenting as an organization," Ommen said. "I know we tend to not do that, but this is a particularly different circumstance since the justification for their moving forward is a criticism of our efforts here."

Industry trade groups including Finseca, the National Association of Insurance and Financial Advisors, the Insured Retirement Institute and the American Council of Life Insurers spoke out against the proposed rule, saying it would reduce access to financial security products for Americans. Regulations already in place provide adequate protection, they said.

Birny Birnbaum, a consumer advocate and executive director of the Center for Economic Justice, countered that consumer and investor advocates and some members of the industry "fully support" the DOL proposal.

"It's particularly important for the proposed consumer protections as consumers roll over their lifetime savings into guaranteed income products," Birnbaum said.

Birnbaum also said he does not believe that the rule would eliminate consumer access to retirement security products or financial advice, and the NAIC models and guidance currently in place do not provide adequate consumer protection.

The DOL is holding a public hearing on the fiduciary rule Dec. 12 and 13 that will be accessible via Webex.

Pet insurance

The NAIC also adopted a new Market Conduct Annual Statement (MCAS) blank to gather underwriting, claims, marketing and sales, lawsuits and complaints data from companies that write pet insurance.

"The creation of the Pet Insurance MCAS blank is in response to the rapid growth of the pet insurance market and follows the recent adoption of the Pet Insurance Model Act," an NAIC spokesperson said.

The first collection of the pet insurance MCAS is set for the 2024 data year and must be reported by companies by April 30, 2025.

Investigating algorithmic bias

The Special Committee on Race and Insurance adopted its 2024 charges, which are largely the same as 2023, and delivered updates on the work of the group.

Vermont Insurance Commissioner Kevin Gaffney said the property and casualty workstream has met with several insurers to focus on their use of marketing and advertising and also recently met to discuss underwriting and rating. Gaffney's group is working to better understand how insurers look at corporate governance principals and best practices to inform their efforts to look at "potential algorithmic bias" within the sector.

The group focusing on life insurance is planning to release a resource guide soon that will have information helpful to all insurance departments looking to "take action" to improve access to products in underserved communities.

The workstream focusing on health insurance has held discussions about mental health coverage and how to address disparities through essential health benefits. The group is also working with Johns Hopkins School of Public Health to develop a survey for the use of artificial intelligence in health insurance. A draft of the survey is expected to be released in 2024 for feedback, and then the process of doing the survey will begin.

2024 officers

The NAIC also announced the election of its 2024 leadership roles during the meeting. Connecticut Insurance Commissioner Andrew Mais will serve as the NAIC's president in 2024.

North Dakota Insurance Commissioner Jon Godfread was chosen to fill the president-elect position, putting him in line for the top role in 2025. Virginia Insurance Commissioner Scott White will be the NAIC's vice president in 2024, and Rhode Island Superintendent of Financial Services Elizabeth Kelleher Dwyer will fill the role of secretary-treasurer.

The officers will assume duties associated with their positions effective Jan. 1, 2024.