If you’ve been in the insurance industry for long, you’ve seen references to the NAIC and NIPR. These two organizations play a fundamental role in regulating our industry, but exactly what they do – and how the two entities relate to another – isn’t always clearly understood.
The National Association of Insurance Commissioners (NAIC)
The insurance industry is regulated primarily at the state level. But as early as 1871, state regulators realized the value to both industry professionals and consumers of making the various states’ regulations more consistent. They came together to create the NAIC, a support organization that represents – and is governed by – the top insurance regulators in the 50 states, the District of Columbia and the five American Territories.
The mission of the NAIC, according to its website, is:
… to assist state insurance regulators, individually and collectively, in serving the public interest and achieving the following fundamental insurance regulatory goals in a responsive, efficient and cost effective manner, consistent with the wishes of its members:
- Protect the public interest;
- Promote competitive markets;
- Facilitate the fair and equitable treatment of insurance consumers;
- Promote the reliability, solvency and financial solidity of insurance institutions; and
- Support and improve state regulation of insurance.
The NAIC has numerous committees and working groups that oversee and advise the various sectors of the industry, for example Life Insurance and Annuities, Health Insurance and Managed Care, and Property and Casualty Insurance. Other groups address the diverse opportunities and challenges our industry faces, such as fraud, market conduct and cybersecurity. The NAIC also acts as a liaison between U.S. regulators and international regulatory bodies.
The NAIC played a vital role in standardizing the insurance licensing process by developing its Uniform Applications and advocating for their adoption by the states.
Another key task of the NAIC is the creation of model laws and regulations. State regulators adopt these models as is or use them as a springboard for creating their own laws and regulations. A recent example is the NAIC Insurance Data Security Model Law. To date, South Carolina, Ohio and Michigan have adopted the model law. More states seemed poised to do so. (Two other states, New York and Connecticut, previously enacted their own laws.)
The National Insurance Producer Registry (NIPR)
The Internet and other technologies made it possible – or at least desirable – for state regulators to be able to share information between their individual systems. To do that, however, there was a need to standardize what information was collected and how that information was processed and stored. To help meet this need, in 1996, the NAIC created a non-profit affiliate, the NIPR. The NIPR’s leadership includes both state regulators and insurance trade associations.
On its website, the NIPR describes its role as, a licensing and compliance resource for insurance professionals, providing expertise, agile technical solutions, innovative tools and data to support the changing needs of state regulators and the insurance industry.
Electronic resources created and maintained by the NIPR include:
- The Producer Database (PDB) – a database of information for individuals and entities licensed to sell insurance products in the various jurisdictions
- The Regulatory Information Retrieval System (RIRS) – a database of actions taken against insurance by state regulators
- The NIPR Gateway – a electronic communication network/protocol that enables producers and insurance companies to share information with the NIPR and with one another
- The Attachments Warehouse – an electronic repository for legal documents, letters of explanation, etc. related to the Background Screening Questions on the Uniform Applications and to administrative actions reported to the NIPR
The availability of these tools has made the licensing and compliance process much faster and more accurate. That benefits regulators, insurance professionals and consumers alike. They have also created a beneficial cycle of innovation. Data sharing encourages greater uniformity, which in turn makes it even easier to share important information.
As globalization and innovative technologies continue to expand the opportunities for the U.S. insurance professionals, the NAIC and NIPR will continue to play a vital role in protecting and nurturing our industry, encouraging agility and transparency.