A proposal by Senate Commerce Committee Chairman Fritz Hollings (D-S.C.) to repeal the McCarran-Ferguson antitrust exemption and
create a new Federal Insurance Commission within the Commerce
Department was strongly criticized by the National Association of Independent Insurers (NAII).
“NAII views this proposal as unfounded, unjustified, and unnecessary. It provides sweeping powers to a vaguely defined new federal regulatory body and usurps the authority of states to regulate the insurance industry,” said Carl Parks, senior vice president, government relations.
Hollings’ proposal was reportedly a surprise given the fact that many states have enacted measures to modernize the insurance regulatory system while support for the so-called optional federal charter concept has waned on Capitol Hill in the past year. Sen. Hollings’ home state of South Carolina is reportedly a recognized leader in state insurance regulatory reform efforts.
Most significant reportedly was the progress made in traditionally troublesome states, such as New Jersey and Louisiana. Enactment of regulatory reforms in these states can only be viewed as a positive development, according to NAII.
“NAII believes that state regulation is the most desirable means through which to achieve a competitive insurance market. We recognize, however, that the support within the industry for state insurance regulation is dependent in large part on the states’ instituting meaningful reforms to modernize regulation to reflect the way the business of insurance is conducted today and will be
conducted in the future. The efforts made by states in the past year to enact regulatory reform is a sign of real progress and the Hollings’ bill undermines these positive developments,” said Parks.
According to Sen. Hollings’ proposal, the new commission would have prior approval authority over both rates and policies, while at the same time allowing consumers to challenge rate applications before the commission.
The commission also would be responsible for licensing and standards for the insurance industry, annual examinations and solvency reviews, investigation of market conduct, and the establishment of accounting standards. “A major problem is that the bill gives no specific standards to be met, leaving all of the points for future determination by the commission,” added Parks.
The House Financial Services Committee has had a number of hearings this year on the federal regulation of insurance; however, no hearings have taken place in the Senate.