Growth of NAIC databases may worsen data flow, some fear.

Proposals to house a number of new central databases at the National Association of Insurance Commissioners, while intended to improve the flow of information between states and insurers, are raising concern among insurance industry advocates that such initiatives may have the opposite effect.

Citing concerns ranging from cost and duplication to the security of trade secrets, some of the largest trade organizations representing U.S. insurers are questioning what they see as a trend within the NAIC to create central database systems.

On the agenda of several groups within the NAIC is the creation of databases that would hold information ranging from the Fingerprints of chief executive officers to market analyses, fraud reports and listings of uninsured motorists.

Where there is no apparent central edict by NAIC officers to accelerate the number of information banks the organization operates, visits to recent national meetings reveal an unmistakable trend, insurers say.

"Anyone who's gone to the last few NAIC meetings notices the proliferation of databases on the agenda," said Don Cleasby, vice president, regional manager and counsel for the Property Casualty Insurers Association of America. "I think there are some eyebrows being raised among interested parties at the NAIC, and there are a lot of open questions."

Some insurer groups suggest the push comes in light of the prospect of a greater federal regulatory role.

"It seems as though the NAIC may be trying to position itself as an indispensable part of the insurance regulation picture," Marsha Harrison, regulatory affairs counsel for the National Association of Mutual Insurance Companies, said in a statement. "While members of Congress work to further develop the State Modernization and Regulatory Transparency Act ... the NAIC may be looking for ways to extend its own life past the time when federal insurance regulation becomes a reality."

NAIC President and Pennsylvania Insurance Commissioner Diane Koken said the NAIC has had databases in place since the late 1980s and that there remains an extensive vetting system whereby interested parties have opportunity to comment and lobby for a change in any plan for a new database that may be on the table. She said she's surprised the industry seems to be coming down hard on current efforts, as the key is to prevent duplication, not to make matters more difficult for companies and regulators.

"There is a desire, if possible, to create great efficiency to avoid the duplication that we were frequently criticized for, to the extent that we determined that it makes more sense to have a single repository for information rather than having companies file something in 55 U.S. jurisdictions," Koken said.

But insurers are concerned the new databases may not protect information as well as states, which have laws in place that prevent the release of company trade secrets and material that could surface in litigation.

David Snyder, vice president and assistant general counsel of the American Insurance Association, questioned the motivation of the NAIC, as a nongovernmental entity, in collecting and protecting data.

"Frankly, we're concerned with the notion this may be viewed as an opportunity to perpetuate the NAIC bureaucracy," Snyder said. "On the one hand, we are very supportive of the NAIC looking into ways to increase the flow of data between insurers and the states, but we wonder if the NAIC is setting itself up as a potential barrier between the states and insurers," Snyder said.