Independent Insurance Agents of America State Government Affairs Committee chairman Ronald A. Smith, testifying at a joint hearing of the Oversight & Investigations and Financial Institutions subcommittees, called on Congress to pass anti-fraud legislation to protect insurance and financial services consumers.
Both subcommittees are subordinate panels of the House Financial Services Committee. Testifying for IIAA, the National Association of Insurance and Financial Advisors, and the National Association of Professional Insurance Agents, Smith said that organizations strongly supports Congressional efforts to increase access to relevant criminal history information and to enhance the ability of all financial services regulators to better coordinate their anti-fraud efforts. However, he added that such initiatives should be carefully crafted to minimize inadvertent side effects, such as high costs and unwarranted invasions of privacy, which could accompany implementation.
Smith, a past president of IIAA and the president of Smith, Sawyer & Smith Inc. in Rochester, Ind., offered a list of protections and requirements to include:
· Information released should be limited to Section 1033 of the Violent Crime Control Act, which prohibits an individual with a criminal felony from engaging in insurance activities;
· Insurance professionals should be required to have a criminal background check performed only once; they should not have to undergo repeated checks in multiple states;
· Administrative requirements for performing a check should be minimized. For instance, fingerprints should be stored electronically for repeated future use;
· Once a state insurance regulator determines that an applicant to be licensed as an agent, director, officer, or other insurance professional satisfies 1033 requirements, it should be sufficient to satisfy any and all 1033 requirements for both insurance agency employers and appointing insurers;
· Non-employers should not be granted access to crimes database information; · Criminal penalties for misuse of FBI database information should be established;
· Agents should not incur new taxes, fees or expenses for compliance with background checks.
Commenting on the creation of a functional regulator anti-fraud network, Smith also expressed support of an information-sharing arrangement through which banking, securities and insurance regulators could pass information about disciplinary actions and investigations among themselves to better enable them to coordinate anti-fraud efforts.
Smith added that any such proposal must be designed to minimize potential costs and to insure the integrity of the information-much of which will be unverified at the time that it is initially disseminated among regulators.
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