business meetingAlmost anyone who has insurance complains about its high cost. But when insurance companies complain about costs, their favorite target is the National Association of Insurance Commissioners, or NAIC.

What is the NAIC? An organization of the insurance regulators in all 50 states, the District of Columbia and U.S. territories. But the NAIC itself doesn't regulate anything. It simply puts together "model laws" or standards that state regulators are supposed to use in their respective states.

And, it seems, not successfully. In a letter to the U.S. Treasury Department last year, the Risk and Insurance Management Society (RIMS), which represents the businesses that actually buy insurance, criticized the "state-by-state patchwork of laws" governing insurance in this country.

Insurers often don't respect the NAIC either. They say that its initials stand for No Action Is Contemplated and the National Association of Incompetence and Cost.

Pom-poms and marching bands

I can attest to that. I used to write for a news service and once talked my editor into letting me attend a NAIC meeting in New York City. I actually thought I could write a story about it.

But when I got there, I saw the commissioners on stage shaking pom-poms and whooping it up to the sound of a marching band. When that was over they all sat down for an elegant lunch.

So much for that.

No free lunch

Of course there is no free lunch. And neither are the other events which take place at the NAIC's three annual conventions. Their budget is paid for by insurers, but also in part by an indirect tax levied on us.

Virtually every insurance organization takes aim at the NAIC's bloat, particularly its "eye-popping" $5 million travel budget.

"In these troubled economic times, companies...are reviewing travel expenses and scaling back," said the Property Casualty Insurers of America last year, suggesting that there were "opportunities in the NAIC domestic travel budget for review."

No checks and balances

But since the NAIC only answers to those benefiting from its largesse, it didn't alter its budget for this year. The National Association of Mutual Insurance Companies was very succinct: The NAIC lacks checks and balances.

Focusing on the looming fiscal cliff, this year insurers ratcheted up criticism of the NAIC's 2013 levy. Insurers pointed out that the NAIC's "surplus" will soon be more than its annual $80 million budget. "There is no justifiable reason for the NAIC to have this extraordinary high amount," says the American Council of Life Insurers.

Junkyard dog

There was a time when the NAIC commissioners did take something seriously: their self-preservation. It happened when the Dodd-Frank financial reform bill was taking shape and insurance companies and business leaders fought to get a national insurance regulator who would give continuity to the fractured, state-run insurance system. Since many insurers like Allstate, Progressive and State Farm operate nationally, and some, such as AIG, internationally, wouldn't it make sense?

The NAIC reacted like a junkyard dog. "The federal government needs to remodel their financial regulatory house, but they need to leave the insurance 'room' alone!" said then President Sandy Praeger.

Keep out!

But these state insurance commissioners went a lot further than just rhetoric. They retreated behind closed doors and held clandestine meetings to stop the "let's-go-national" movement before it could gain traction. They kept out the media like myself, and hired security guards to block state legislators, even those who might have supported them, from gaining access.

And it worked. Even though Dodd-Frank created a federal insurance office with a director, he or she is essentially powerless, tucked away in the Department of the Treasury, and their figurehead job is to attend international conferences. As a former state insurance commissioner and officer of the NAIC, the current director is part of "the club."

The good, the bad and the politicos

The NAIC does include capable people who have distinguished themselves as state regulators. As Florida insurance commissioner, current NAIC President Kevin McCarty spearheaded the movement to force life insurance companies to notify beneficiaries when the policyholder died.

But others, like John Oxendine, who was Georgia's Office of Insurance and Fire Safety commissioner, have less than savory reputations. Oxendine used his position to launch his bid to become governor, threatening the other candidates, according to media reports. He also took $120,000 from PACs with similar addresses which turned out to be fronts for two Georgia insurance companies he was supposed to be regulating.

In all fairness: the NAIC is trying to curb some of its worst abuses. Until recently no one was allowed to see its model laws unless you paid for them. Model laws are supposed to be the basis for state insurance regulation. It now appears this could end.

But the practice of collecting information from state insurance regulators and selling it for tens of millions of dollars a year -- information paid for by taxpayers at the state level -- will not. That's the way they roll.