The American Property Casualty Insurance Association (APCIA) today announced its Principles of Good Insurance Regulation, which were adopted by its Board of Directors this week.
These overarching principles support the facilitation of a regulatory environment that: (1) meets the needs of a diverse set of consumers; (2) focuses on those aspects of regulation that foster growth of private competitive markets; (3) balances the demands of accelerating insurance and product innovation while preserving a competitive market; and (4) keeps pace as insurance markets (particularly cyber risk and the risks associated with automobile liability in an autonomous environment) evolve.
"APCIA is committed to fostering a state-based insurance regulatory architecture that will expand regulatory flexibility, facilitate innovation, and promote the growth of healthy, vibrant, and competitive private insurance markets in the United States," said David A. Sampson, APCIA president and CEO.
The principles include adaptable regulatory concepts that will promote effective and efficient insurance markets and regulatory supervision well into the future.
The following principles underscore APCIA's commitments:
* APCIA recognizes that insurance regulators are tasked with financial solvency oversight while ensuring proper market behavior. These twin pillars of insurance regulation must be balanced. The primary responsibilities of regulation should be to enhance solvency protection and ensure compliance with appropriate and necessary market conduct standards.
* Regulation should advance McCarran-Ferguson's principled balance of regulatory and antitrust policy. It should also support movement towards a private competitive market that encourages innovation, domestically and internationally, regardless of corporate form or business model.
* The best regulator of product and price is a competitive market. An ideal insurance regulatory architecture is one that both promotes and provides the necessary regulatory flexibility for competition and innovation in the marketplace.
* A competitive market inherently includes incentives for the efficient allocation of resources by insurers for the benefit of consumers. Such a market attracts sufficient capital to ensure that public demands for insurance products and services can be met. Competition also promotes insurer flexibility and availability of diverse product offerings that meet evolving market needs and expectations.
* A competitive insurance market is essential as it meets the changing needs and demands of the customer in the areas of digitization, technology, and product innovation.
* Regulatory standards should be transparent, consistently applied, and easily ascertainable. Where appropriate, both solvency and market conduct should be uniform throughout the state-based regulatory system. Even without uniformity, all regulatory standards should be consistent, transparent, and collaborative during both promulgation and implementation.
* Insurance regulation must protect all stakeholders by preserving the sanctity of the policy contract. Regulatory standards in place at the inception of a policy contract must be maintained over the term of the contract.
* All stakeholders benefit from reasonable, necessary, and clear regulation. Good insurance regulation simultaneously fosters informed consumer choice, maintains solvency oversight, and limits fraud and deceptive practices by all participants in the marketplace.
* Good insurance regulation is both effective and efficient. The economic cost of regulation can be minimized by rigorous use of cost/benefit analysis in both developing new regulation and considering the utility of existing regulations. Any requests for insurer data should be made only after an analysis of what is necessary to facilitate the associated regulatory function. Strong data security protections and notification protocols should be implemented by all state insurance departments for any data collected from insurers.
* Regulatory balance is key. Over-regulation can be as detrimental to the marketplace as no regulation. Some level of regulation is necessary to protect consumers and insurers, but excessive regulation of price and product can impact affordability, limit availability, and slow the ability of insurers to innovate and meet consumer needs for new products and services. In promulgating regulations, consideration must be given to unintended market consequences for both insurers and their customers.