National Association of Insurance Commissioners (NAIC): An Overview

KEY TAKEAWAYS

• The NAIC is a nonprofit, nonpartisan organization in the United States of America.
• It was created in 1871 in order to set the standards and best practices for the U.S. insurance industry.
• The NAIC also aims to provide support to insurance regulators.
• The organization aims to promote competitive markets, protect the public interest, and support and improve the state regulation of insurance.

What Is the National Association of Insurance Commissioners?

The NAIC is a nonprofit, nonpartisan organization. It is governed by the chief insurance regulators of the 50 states. As well as the District of Columbia, and the five U.S. territories. These are American Samoa, the Northern Mariana Islands, Puerto Rico, Guam, and the Virgin Islands. 

The NAIC sets the standards and best practices for the U.S. insurance industry. It also provides support to insurance regulators. Along with this, it provides vital information and helpful resources to customers. 

In the United States, any insurance products that are sold are mainly regulated by the states themselves. This is instead of the federal government. 

A Short History of the NAIC

In 1871, the NAIC was founded by state insurance regulators. It was created with the aim to address the need to coordinate the regulation of multistate insurers. Their first major breakthrough when it came to this aim was developing uniform financial reporting by insurance companies. 

Insurers regularly do business across multiple states. This means that there was a question of whether or not they should be regulated on a federal level or a state level. This has been a matter of debate in the U.S. for a long time. 

In 1944, The Supreme Court case “the United States v. The South-Eastern Underwriters Association” decreed that the insurance industry should be regulated by Congress. This was under the Commerce Clause of the Constitution. It gave lawmakers authority when it came to regulating interstate and international commerce. The following year, Congress overrode that ruling when the McCarran-Ferguson Act was passed. This exempted the insurance industry from almost all federal regulations. Including the antitrust laws. 

In modern-day, the regulatory authority still resides with the states in most cases. 

How Does the NAIC Work?

The group states its regulatory goals as wanting to:

• Promote competitive markets
• Protect the public interest
• Support and improve the state regulation of insurance
• Promote reliability, solvency, and financial solidity of insurance institutions
• Facilitate the fair and equitable treatment of insurance customers

They also have three focuses listed:

• To constantly be evolving and adapting
• To think nationally, and act locally
• To have an unwavering commitment to protection

The NAIC develops model regulations and laws through committees, working groups, and task forces. This is with the aim of helping to standardize insurance across the states. The standing committees the NAIC has includes:

• Annuities and life insurance
• Managed care and health insurance
• Casualty and property insurance
• Market regulation
• Consumer affairs
• The financial condition of insurers
• Financial regulation accreditation and standards
• International insurance relations

The NAIC headquarters are situated in Kansas City, Missouri. They also have executive offices in Washington, D.C. They meet formally three times a year and they tend to be open to the public.

Summary

The NAIC is an important regulatory organization. They help to develop model laws for state insurance regulators and provide vital information.