The top official of the state’s industry regulator says the rules need more polish.
The commissioner in California has cautioned the regulators of other states that he will not be voting in favor of a life insurance regulations overhaul until a better understanding of the necessary resources is established.
The overhaul would change the way that insurers establish their claims reserves.
Commissioner Dave Jones said that he was not ready to vote for the life insurance regulations overhaul because the industry did not yet have a firm enough grasp on what resources would be required for its implementation. The current proposal says that insurers would need to dump their current system, which uses formulas from the industry as a whole for determining how much money should be held aside in order to be able to make the payouts to policyholders and their beneficiaries.
The new life insurance regulations proposal would have them use internal models, instead.
This would mean that life insurance companies would have models that would be based on their own specific data and previous experience with their risks, products, and other individual elements.
The new life insurance strategy has been in the works for nearly a decade with the the National Association of Insurance Commissioners (NAIC). That organization is made up of state officials who seek to establish the solvency standards that will be adopted by their states.
As the vote was for this week, Commissioner Jones issued a four page letter in advance, addressed to the other officials in the organizations, saying that “little, if any, action has been taken to either identify or quantify” the resources that would be needed from each of the insurance departments in the states for reviewing the models created by the life insurance companies. That said, those models are expected to be very complex.
He wrote that “If we should have learned anything from the last financial crisis, trusting a financial industry to monitor itself can only be effective [if] that trust can be verified.” In that statement, he was making reference to the 2008 to 2009 global market crisis. This letter was issued nearly at the same time that the leading New York watchdog for financial services also cautioned against the life insurance regulations changes.