Insurance is now a global business and rapidly changing, particularly commercial insurance. However, regulation of commercial insurance markets in the U.S. has not kept pace with the changing nature of the insurance industry, as well as the capacities and needs of buyers. Regulation works best when it remedies significant market failures and truly protects insurance buyers. Many states have lost sight of this principle with respect to commercial insurance, and in some cases have been too slow at the State legislative level to rewrite laws that were put into place 50, 60, or even 100 years ago.

Concerns about this variance between regulation and markets prompted state insurance commissioners and the industry to develop a framework of recommended reforms of commercial insurance regulation. A principal component of this initiative was to deregulate to a great extent the insurance transactions of large businesses with operations in multiple states. It also envisioned a flexible and progressive approach to easing the regulation of all commercial insurance prices and products. The concept was to decrease the intensity of regulation as the size and sophistication of the buyer increases. The National Association of Insurance Commissioners (NAIC) showed its support of this platform with its adoption of a guiding brief in 1998, which was a major change in regulatory philosophy that would substantially increase market efficiency. The hope was that the various states would enact and implement the recommended reforms. As expected, some states have adjusted, while others have not.

Effects on the Insurance Agents Errors and Omissions Market
ISO and other similar entities have provided a consistent form and policy structure for many insurance lines and products over the years. This has eased the burden of agents having to review and understand scores of policy forms from multiple carriers. Even with that ease, agents are still required to have an intimate understanding of coverages, terms and policy forms. With deregulation evolving, it is inherent that agents review all products and policies prior to selling them. It is incumbent that regulatory bodies maintain a quality educational standard in their respective CE programs to reinforce this. Additionally, the insurers and the states they do business in should apply the social criteria of simplicity to the policy creation process. If insurers are going to create their own forms as a result of deregulation, they should be held to the standard of ensuring that they are relatively simply to interpret and that they afford proper coverage.

Conclusion
The easing of regulatory restrictions should extend as far as possible in terms of all markets, buyers, insurers, and intermediaries. No segment should be regulated more heavily than is absolutely necessary and appropriate to protect the buyers in that market. Unfortunately at the state and federal levels, those decision makers do not have the necessary expertise to understand the true need for reform. Prior approval requirements for rates and policy forms should be rescinded and competitive regulatory systems instituted for all commercial insurance lines, regardless of the type of product and the size of the buyer. If individual consumers fare well under such systems for auto and home insurance, certainly businesses can do the same for the types of insurance they purchase. Currently, 20 states still require prior approval of commercial lines rates, and the vast majorities require prior approval of commercial policy forms. Requiring the filing of policy forms for standard products purchased by small businesses and compulsory coverages (e.g., workers compensation) is a matter for regulatory judgment. Regulators can judge whether they can use alternative means to ensure that forms comply with state laws. For other products, effective monitoring of the policy forms used by insurers should be sufficient to prompt regulatory action when necessary. While commercial lines deregulation represents a positive and modern development, its implementation to date falls far short of what is needed to promote market efficiency or offer any benefit to the insurance provider or consumer.