When are endorsements to in-force business required?
Let me know: How many of you have been asked to endorse your in-force contracts as a result of post approval reviews to address NY Department desk drawer rules (AKA "interpretations") or make minor language changes? I have been pretty vocal here and elsewhere in expressing my opinion that federal regulators are unlikely to be more efficient or more effective regulators of the insurance industry than state regulators are now. Overall that is.
However, one area that just boggles my mind is the NYSID's current practice of asking for endorsements to in-force contracts on post-approval reviews when there is no clear violation of law regulation or even circular letter. When I see these post-approval review letters, it makes me question my own sanity on the regulation issue. To me, it is the regulator's equivalent of excess and wastefulness, different only in scale from corporate jets, new office decor and expensive retreats. It seems to reflect a failure to ask whether resources are really most importantly allocated to this endorsement effort vs. other competing demands for those same resources: both at the regulating agency and at the company. Costs to taxpayers and company consumers are clearly increased and for what end? Who benefits? How? I just don't see it.
When a regulator demands that a company send out an endorsement to all their policy-holders that has little or, much more often, no impact to the consumer,it is a complete waste of resources. People at the company have to draft and review the endorsement, load it onto a system, print copies on paper, stuff the envelopes, pay the postage, pay the staff to answer the questions from policyholders, etc. Department examiners review it, write comment letters on it, use paper to print it out, sometimes hold meetings about it, send out letters to companies with postage to be paid. Now, if the endorsement is to correct a real statutory or regulatory violation - no argument! It must be done. But as we all know, that is not the usual case. I rarely see those situations. I most often see quite the opposite. Endorsements that do absolutely nothing to change the operation of the policy for the consumer but tweak a few words here and there to comply with desk drawer/ interpretative rules.
I am a strong believer of insurance regulation - and strong regulation. I think insurance needs a different type of regulation than other financial services. But it needs to matter! Regulatory action without a clear purpose is nothing other than wasteful. When there is so much need for real and effective regulation, how can such waste be justified?
