The market for model laws: The diffusion of NAIC model laws

Abstract

The National Association of Insurance Commissioners (NAIC) issues model laws to promote uniformity in the US state‐based insurance regulatory system. In this paper, we study the diffusion of 197 NAIC model laws, examining the adoption patterns and influencing factors. Employing a network algorithm, we uncover the underlying network over which model laws spread. The NAIC plays a central role in this network, and its influence increases over time. Additionally, we explore factors affecting states' model law adoptions from three perspectives: the laws' attributes, the states' internal characteristics, and external influences. We find that a law's attributes play a key role. Model laws characterized by low complexity, distinct from existing state laws, mandated for accreditation compliance, and recently amended are more likely to be adopted. While we do not find significant impacts of various state‐internal characteristics, our results reveal that states follow geographic and ideological neighbors in adopting model laws.