Two former governors urged the National Governors Association to back federal legislation that would implement an optional federal charter regulatory system in the insurance industry.
“The success of the insurance industry, a major revenue producer for state governments, depends on the existence of a modern and efficient regulatory system that reacts quickly to rapid changes in the marketplace and provides efficiencies and convenience to consumers,” said Frank Keating, president and CEO of the American Council of Life Insurers (ACLI), and Marc Racicot, president of the American Insurance Association (AIA), in joint letters to the NGA.
An optional federal chartering system for insurers, patterned after the dual bank regulatory system would reduce regulatory costs and inefficiencies, spur innovation in product design, reduce costs for consumers and enhance the competitiveness of the insurance industry both domestically and globally, the letters said. An OFC system would also provide the framework for strong and uniform consumer protections, according to the letters.
Keating is the former two-term governor of Oklahoma. Racicot is the former two-term governor of Montana. Racicot is also former chairman of NGA.
Legislation called the National Insurance Act has been introduced in both the Senate and the House to create an optional federal chartering system for the insurance industry. The legislation—S. 40 in the Senate and H.R. 3200 in the House—is supported by a wide range of organizations, including groups representing life insurers, property-casualty insurers, life insurance agents, property-casualty agents, reinsurers and insurance buyers.
In their letters, Keating and Racicot said that changes in national and global economics require a new insurance regulatory structure.
“The stakes in this policy debate are high,” the letters said. “The insurance industry must compete in an interstate and international marketplace against financial service providers that can bring innovative products to market much more quickly than insurance companies and at lower costs.”
An OFC system, the letters said, will encourage states to finally achieve long-delayed uniformity and thus make state charters an attractive alternative to a federal charter.
Copies of the letters, sent to outgoing NGA Chair Gov. Janet Napolitano of Arizona, and incoming NGA Chair Gov. Tim Pawlenty of Minnesota, are available at ACLI or www.aiadc.org.