The Service Contracts Model Act: a quarter century and counting - what now?

The U.S. service contract industry operates largely as a regulatory orphan; i.e., an industry without strong, focused, or consistent oversight coming from any particular authoritative body. That said, 26 years ago, the NAIC—the U.S. insurance coordinating regulatory body—stepped into that void when it promulgated its Service Contracts Model Act (#685) as a measure for the regulation of that industry. Since that introduction, the service contract industry has almost doubled in size, and is still growing at a rapid pace, while the industry inefficiencies that initially precipitated the NAIC’s original action persist. Noting the passage of a quarter century, this paper takes the opportunity to reassess the effectiveness of Model #685 and contemplate viable regulatory options for the service contract marketplace. This paper provides a brief summary of the history of the service contract industry in the U.S., efforts to regulate its behavior, and an assessment as to feasible sources of regulation in the future.