By Jeff Dial | Point of View
The National Association of Insurance Commissioners (NAIC) has a unique role as a quasi-government agency that sets official insurance standards and policies across all 50 states and the District of Columbia. With such vast power, one would expect a non-partisan agency to be transparent and accountable to the people it serves.
Yet a quick peek at the organization’s structure, funding, and lack of oversight makes one thing clear: the NAIC faces a credibility crisis.
To enable the institution to truly function as it should, an independent, comprehensive ethics audit is needed to bring much-needed sunlight to an organization that has, for too long, benefitted from operating in the shadows.
One of the most immediate and obvious ways that the NAIC evades transparency is through financial disclosures, or lack thereof. Despite being a 501(c)(3) nonprofit, the NAIC is exempt from filing an annual tax return.
In 2024, the organization’s bloated budget was up to $160 million, a whopping $24 million increase from just two years prior. The NAIC also does not disclose the salary of its CEO or other senior executives – information that, for obvious reasons, is required of other 501(c) nonprofits.
What’s more, the NAIC is not subject to standard Freedom of Information Act (FOIA) requirements, nor do they disclose their financials. With all this secrecy, consumers across the country would be right to wonder: is the NAIC really prioritizing sound insurance policies for all Americans?
The little information we do receive from the NAIC doesn’t instill confidence that the group is acting in the best interest of consumers.
For example, in addition to receiving taxpayer dollars via membership dues, the insurance industry itself – the very industry the NAIC was created to oversee – provides a significant portion of its funding, creating clear conflicts of interest. In fact, the largest source of revenue for the NAIC – totaling over $40 million in 2024 – is filing fees paid by insurance companies to access the NAIC’s Financial Data Repository (FDR).
The organization’s structure and funding streams may be opaque, but it’s clear who stands to gain: the NAIC. Worse, it’s individual states and their consumers that stand to lose. Insurers must be accredited by the NAIC to operate in states across the country. This system handcuffs state-level regulators who are on the ground and better know their state’s unique needs and changing dynamics, preventing them from adopting regulations and making decisions that best suit the consumers they are supposed to represent.
One of the most egregious examples of misaligned incentives is the NAIC’s Securities Valuation Office (SVO), which is currently attempting to override credit ratings provided by independent agencies and apply the NAIC’s own rating to securities held by state-regulated insurers. This is another move to benefit the NAIC, not consumers, and bring more business in-house for the organization’s valuation services, whose revenues exceeded 2023 projections by more than $2 million.
Amassing power in order to bolster your bottom line is not the oversight that American consumers expect or deserve. To solve this credibility crisis, the NAIC must be subject to FOIA requirements and make their tax forms public.
An ethics audit should also be conducted by an independent and trusted third party that can shed light on the conflicts of interest among specific offices and individual staff members within the organization. These steps will begin to return accountability of the NAIC to where it rightly belongs: the states and consumers.
Editor’s Note: Jeff Dial is former state representative, representing parts of the East Valley and Ahwatukee
