Responding to the NARAB Requirement

• As of April 16, 2003, 49 states, the District of Columbia and Guam have passed the Producer Licensing Model Act (PLMA) or other licensing laws with the intent of satisfying the reciprocity licensing mandates of GLBA. 1 more legislature is expected to consider PLMA in 2003.
• 38 states have been certified by the NAIC as meeting the requirements for producer licensing reciprocity under GLBA. At least 1 more state (Pennsylvania) is expected to become reciprocal when its law becomes effective in June 2003. We anticipate more states will become reciprocal depending on the outcome of their current legislative sessions.
• The only significant barriers to national reciprocity are fingerprinting and surplus lines bond requirements for nonresident producers. These represent core consumer-protection issues to the states that have them in place. However, a state that is reciprocal is not precluded from extending reciprocity to states that maintain these consumer protection requirements, which may further expand the scope of reciprocity.
• 23 states plus the District of Columbia are processing non-resident applications electronically through the National Insurance Producer Registry (NIPR) gateway.  Nearly 12,000 non-resident license applications were processed through NIPR during 2002.
• The Uniform Non-Resident Application is now accepted in 46 states, and in some states is accepted for surplus lines and limited line licensing.

Speed to Market Initiatives

• All 50 states and the District of Columbia are licensed to use the System for Electronic Rate & Form Filing (SERFF), the first electronic system for product filings by insurers. The District of Columbia and 49 states are in production and accepting rate and form filings.
• Sweden HotelsAll 50 states and the District of Columbia have implemented rate and form filing checklists and review standards, which are linked to the NAIC Web site.
• Nearly 700 companies are licensed to use SERFF, approximately 300 of which have joined the program since the beginning of 2002.
• The Coordinated Advertising, Rate & Form Review Authority (CARFRA) provides a single point of filing and review, along with national standards for life and health insurance products. Currently, CARFRA has adopted product standards for the following insurance products: annuities, Medicare supplement (including Appendix B) and term life. CARFRA is in the process of developing product standards for 2 additional products - individual flexible premium universal life and individual variable annuity. Currently, there are 22 states accepting CARFRA filings.
• NAIC members have approved an interstate compact to create a single point of filing that will develop uniform standards for life insurance and annuity products. The 9interstate compact will set uniform standards, receive product filings and give regulatory approval.
• The Improvements to State-Based Systems Working Group appointed 4 new subgroups: the Review Standards Checklist Subgroup, the Property and Casualty Product Uniformity Subgroup, the SERFF Enhancements Subgroup, and the Filing Submission Uniformity/Metrics Subgroup.

Uniformity in Company Licensing and Corporate Governance

• The National Treatment & Coordination Working Group is scheduled to conduct a corporate reorganization pilot project in 2003. This project will focus on the regulatory requirements involved after an approved merger or acquisition of multiple affiliated insurers. In particular, the project will concentrate on the regulatory requirements associated with product filings and producer appointments.
• The Uniform Certificate of Authority Application (UCAA), a company licensing system that expedites the review process of a new state license, is well into its implementation phase. With some exceptions, the information underlying the application is uniform throughout the United States. All jurisdictions have agreed to accept licensing applications according to UCAA system forms and guidelines. An NAIC automated system for facilitating UCAA and related filings was put into production in 2001 and enhanced during 2002.
• In 2003, the working group plans to conduct a pilot project on further streamlining the company licensing process. Components of this project will: revisit application elements to identify further streamlining opportunities; identify standard review procedures (e.g. best practices) for UCAA filings; monitor usage of the UCAA automated system and identify further streamlining opportunities; and identify causes of delayed actions on licensing applications

Insurance Holding Company Initiative

• In 2002, NAIC members adopted an extensive guide for state financial regulators to use in evaluating the financial condition of an insurer that is part of a larger business group. The paper, "Framework for Insurance Holding Company Analysis," provides guidance on understanding a holding company structure with insurers, as well as a coordinated approach to the review of holding company transactions that impact insurance subsidiaries domiciled in multiple jurisdictions.
• In addition, a database has been developed to facilitate information sharing on acquisition and merger filings, commonly known as a Form A filing. This database, in conjunction with other related tools, will promote more effective communication among states on merger and acquisition filings.
• Focused efforts are underway to institute the "lead state" framework within the state regulatory system. Once implemented, on-site examinations, financial analysis and other regulatory review processes are 3expected to function in a more coordinated and efficient manner.

Implementing Privacy Protections

• All 50 states and the District of Columbia have taken steps to put privacy protections in place that meet GLBA standards - 49 states and the District of Columbia have taken final action. Discussions about uniform interpretation are ongoing.
• NAIC members adopted the Standards for Safeguarding Customer Information Model Regulation in April 2002. The model regulation establishes standards for insurers to meet the confidentiality and security requirements of section 501 of GLBA. Approximately 14 states have taken action to promulgate this model regulation.
• The Privacy Notice Content Subgroup was formed to draft sample language for insurers to use so privacy notices are understandable to consumers, while retaining operational uniformity and compliance with the requirements of the NAIC model privacy regulation that are critical to industry. The subgroup has issued a report and considered comments from regulators and interested parties. The report will be adopted at the Privacy Issues Working Group meeting in Atlanta.

Coordinating with Federal Regulators

• Recognizing the need for improved cooperation and communication with federal financial services regulators, particularly in the wake of enactment of GLBA and the convergence of the financial services industries, the NAIC continues to push for strong working relationships between state insurance regulators and their federal financial services counterparts.
• Over the last several years, the NAIC has participated in a series of high-level meetings for NAIC officers and members with the top federal regulators from the OCC, OTS, Federal Deposit Insurance Corporation (FDIC) and Federal Reserve. Ongoing regulator-to-regulator consultations have been held to discuss examination procedures and enhance the development of needed expertise and exchange information with respect to regulatory trends in the changing financial services marketplace.
• Efforts are currently underway to develop stronger working relationships with the Securities and Exchange Commission (SEC). Through the NAIC, the SEC is working with several states on privacy enforcement efforts, and the NAIC hopes to expand these coordination efforts to new areas going forward.
• five star hotel in CologneThe development of regulatory cooperation agreements with federal agencies has been a high priority for NAIC members. These model agreements provide for the sharing of relevant regulatory information, including information about examinations, enforcement and consumer protections. They also include provisions to ensure the protection of confidential information.
• As of February 2003, 46 states plus the District of Columbia have signed regulatory cooperation agreements with the OTS; 43 states plus the District of Columbia have signed agreements with the OCC; 47 states plus the District of Columbia have agreements with the FDIC; and 38 states plus the District of Columbia have agreements with the Federal Reserve.

Consumer Protections

• In December 2001, NAIC members successfully launched an interactive Web tool, the Consumer Information Source (CIS), specifically created for consumer research of company complaint and financial data.
• CIS allows consumers to locate basic information about a specific insurance company, including amount of premiums written, assets, liabilities and licensing information. The site also allows consumers to file consumer complaints and review statistical information on previously resolved complaints against a company. During 2002, the Consumer Protection Working Group made some refinements to include financial information and changes to improve the accuracy of the index summary. During 2003, the Consumer Protection Working Group hopes to refine and enhance the CIS program to improve data and complaint code information received from the Consumer Database System (CDS), which is used to populate the CIS.
• The Market Regulation & Consumer Affairs (D) Committee is continuing to work on the following 4 key market-reform initiatives: (1) uniform examination procedures; (2) market analysis; (3) interstate collaboration initiatives; and (4) market conduct examination resource guidelines.
  • The uniform examination outline has been drafted and work continues on the uniform data request. A total of 42 states have certified themselves as complying with two or more of the following examination areas: (a) exam scheduling; (b) pre-exam planning; (c) exam procedures; and (d) exam reports.
  • A pilot data-request project for market conduct analysis is underway in 9 states and work on this pilot program will continue through 2003.
  • A total of 42 states have participated in some type of collaborative effort during 2002, which exceeds the goal of 30 states established for 2002.
  • An inventory of resources for market regulation was adopted in December 2002.

The NAIC's Consumer Protection & Antifraud and Information Systems divisions are working together to set up a pilot program for producer fingerprinting.