Innovation Demands Speed
I was recently reading a copy of Fast Company, one of my favorite magazines. I still read it in paper format and like to feel the pages as I ponder the seemingly endless number of smart business ideas ingrained in the articles. The piece that caught my attention was about the world’s 50 most innovative companies.
These days we hear a lot about innovation, social media, customer driven creations, sustainability, transparency, and so on (essentially, all of the things that help land a company on such an accomplished list). I’m not here to be critical, but I’m going to go out on a limb and guess that, through no fault of their own, firms in our business—both brokers and distributors of risk-based products—won’t soon be noted on this list. This is not an attack on the boring nature of insurance folk. In fact, we have witnessed and pay homage to the deep levels of creativity and innovation put forth by this industry in response to customer needs in recent years. There is smart thinking all over the place. There just needs to be more smart doing.
Easier said than done, though, when the regulatory system that oversees anything new or innovative was created when horses pulled wagons and still operates with a buggy whip in hand.
We at The Council have long tried to work with this regulatory system, known as the NAIC. It hasn’t always worked out. We’ve been dealt more fees, headaches and hassles and less simplicity and innovation. Need I rehash producer licensing? This is not intended to be an attack on regulators. They all have jobs to do. The fact that the regulatory system they work in doesn’t make a whole lot of sense isn’t squarely on their shoulders.
The NAIC has become nothing more than a very large economic drain on an industry that has seen very little in results in exchange for a good deal of money. Its annual budget has increased from about $10 million just a decade ago to more than $75 million today—all funded by an industry that already pays an incredible amount in premium taxes, fees, fines and other things. It all adds up to a substantial cost with little or no payback. Where is it all going?
And what is the NAIC, anyway? The NAIC doesn’t even seem to know. Its name suggests it’s an association, but it doesn’t play like one, often throwing its weight around the industry like it has superpowers. Congress has even stepped in and has asked the NAIC to enlighten lawmakers and the rest of us on why it is now angling to “brand itself as a ‘standard-setting organization’ rather than a trade group.”
The grilling came in the form of a letter penned by U.S. Rep. Ed Royce, R-Calif., who requested a “substantive” and “prompt” reply from the NAIC explaining exactly what the group is and how it is governed. While speed is not a word I associate with the NAIC, it might do itself some good this time around to make good on the representative’s request.
This latest debacle could be chalked up to the NAIC’s struggle to be relevant in what we now know as the Dodd-Frank/Federal Insurance Office regime. While the FIO has limited pre-emptive authority, it does still occupy the bully pulpit on matters of insurance regulation, and the NAIC may be feeling like its turf is being invaded. Or this could all just be some big misunderstanding. Either way, the NAIC is in a pickle and is facing all sorts of legal heat.
When I think of industry standards, I think of ACORD. I think of efficiency. I don’t think of the NAIC’s horse-and-buggy approach to regulation that merits a name more like “No Accountability or Innovation Conference” than “National Association of Insurance Commissioners.”
It’s time for the NAIC to get out of the industry’s way so we can start landing some of our worthy industry players on that Fast Company list. We don’t appreciate being carted around as if we’re characters in the HBO series Downton Abbey, brilliant as that show may be.