THE PUBLIC MIND: INSURANCE MODEL COULD DEVASTATE CONSUMERS, COMPANIES

Lewis Melahn, director

of Insurance for Missouri:

This letter is written to you in your capacity as a member of the National Association of Insurance Commissioners (NAIC). I am writing this letter based on my knowledge of the NAIC's advisory committee on assumption reinsurance, as an avid subscriber to The Insurance forum, and as a concerned citizen.

The May, 1992, issue of The Insurance Forum, discusses a model act proposed by the NAIC's "assumption reinsurance working group." The model act is to be discussed at the June meeting of the NAIC, and is to be considered for adoption at the September meeting.

The problems that would be created by the model act are discussed in detail in the May, 1992, issue of The Insurance Forum.

If the model act is adopted by the NAIC and enacted by the states, it would have a devastat ing effect on the rights of insurance consumers!2 Also, I believe it would, at best, eventually become an embarrassment for the NAIC and a black eye for state regulation of the insurance industry. At worst, it could become an open invitation for federal intervention, and it could drag our industry into the sinking quagmire of federal regulation proposed by the left-wing, check-kiting liberals in Congress.

Alternatives to the NAIC model act are readily available. Professor Belth drafted a strong, consumer-oriented model act about a year ago and submitted it to the NAIC's working group; his proposal was published in the May, 1991, issue of The Insurance Forum. Also, as discussed in the May 1992 issue of the Forum, the Washington state insurance department adopted a strong, consumer-oriented regulation in November of 1991.

I, along with Professor Belth, stand ready to assist you with the development of meaningful disclosure requirements, so that consumers would have an opportunity to provide informed consent to any proposed transfers of their policies from one insurance company to another.

To date, neither the NAIC's advisory committee on assumption reinsurance nor its assumption reinsurance working group has shown genuine interest in the disclosure issue.

Director Melahn, you must be made aware that the working group's draft of an assumption reinsurance model would effectively destroy rather than protect the rights of insurance policy owners as their insurance contracts are administratively shuffled from one insurance company to another with the "blessing" of the various state departments of insurance throughout the United States. Its adoption by the NAIC and subsequent enactment by the various states would be nothing short of a disaster for insurance companies!

I strongly urge you to soundly reject the NAIC model act and encourage your NAIC colleagues to do likewise.

Sincerely yours,

Robert T. Krone Jr.

Cape Girardeau

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