While rejecting federal regulation of insurance, specifically a proposal by Sen. Charles Schumer (D-N.Y.) calling for federal insurance charters, the Independent Insurance Agents of America (IIAA) this week adopted a new policy position that advocates the use of federal legislative tools to foster uniformity and streamline the state-based regulatory system. IIAA’s National Board of State Directors approved the new policy statement during its winter meeting earlier this week in Phoenix, Ariz.
“Although the need for greater efficiency and uniformity in the state insurance regulatory system is clear,” said IIAA President Thomas B. Ahart, CPCU, AAI, “federal regulation goes too far — equivalent to throwing the baby out with the bathwater. The Schumer bill, and other federal charter proposals, is not in the best interest of consumers.”
Schumer’s bill — the National Insurance Chartering and Insurance Act — calls for an optional federal insurance charter, and proposes to create the Office of the National Insurance Commissioner, patterned after federal banking regulators, that would fall within the Treasury Department. The powers of the national insurance commissioner would include oversight of all lines of insurance, solvency, company and agent licensing, and the entire spectrum of insurance regulation. IIAA is opposing Schumer’s proposal.
“IIAA strongly believes that what is needed to improve insurance oversight is a system that builds on, rather than dismantles, the states’ inherent strengths to meet the challenges of a rapidly changing insurance environment,” said Ahart, president of Ahart, Frinzi & Smith, Phillipsburg, N.J. “Yes, there is an urgent need to respond to marketplace and economic circumstances. But we must not cast aside skill and experience that the states have as regulators of the insurance industry.”
The Association’s new policy embraces a middle-ground approach that would use federal legislative tools to reform insurance regulation while at the same time preserve the state-based insurance regulation infrastructure, said IIAA CEO Robert A. Rusbuldt. “Ours is a pragmatic approach that — through the use of federal legislative action to overcome the structural impediments to reform at the state level — attempts to improve rather than replace the current state system of regulation to promote a more efficient and effective regulatory framework,” Rusbuldt asserted. “Rather than employ a one-size-fits-all regulatory approach, a variety of legislative tools could be employed on an issue-by-issue basis to take into account the realities of today’s marketplace and to achieve the same level of overall reform as the imposition of a federal regulator.”
Leading industry concerns outlined in the new IIAA policy that need to be addressed include producer licensing, rate and form filing/speed to market, privacy and consumer protection, as well as priority insurer issues such as company licensing, transaction reviews, corporate governance, market conduct examinations, audits, solvency and guaranty associations.
IIAA proposes using “federal tools” — minimum standards, national reciprocity or multi-state uniformity, incentives or a carrot-and-stick approach, and preemption of certain state laws — to achieve the targeted reforms necessary to preserve and streamline state insurance regulation.
By addressing these issues through the use of various federal tools, IIAA believes that greater uniformity, efficiency and responsiveness in the state-based system will be created and elimination of unnecessary or inconsistent regulatory requirements can be accomplished, Rusbuldt said.
“The advantage of this approach is that it offers the best of all worlds. It will promote the establishment of more uniform standards and streamlined procedures from state to state, protect consumers while enhancing marketplace responsiveness, and emphasize that the primary goals of insurance regulation can best be met by improving, not abandoning, the state-based system that has been in place for more than 150 years,” Rusbuldt asserted.
“Much of what we advocate can be found in the model laws of the National Association of Insurance Commissioners (NAIC), except that we believe Congress can play a role in implementing what the NAIC has proposed,” Rusbuldt said.
For example, under the IIAA “federal tools” approach a more efficient producer licensing system could be accomplished by establishing a reciprocal licensing system and adopting standards that promote greater consistency and uniformity in the licensing process, explained Rusbuldt.
“For months, we have talked and met with a number of insurance companies, agent groups, several state regulators and interested members of Congress,” Rusbuldt said. “While this is a new position, it continues to advocate state regulation of insurance, but not the status quo of our regulatory system, which clearly needs to be modernized and streamlined. We believe that this tailored, pragmatic approach is doable from a political perspective on Capitol Hill, and since it would reform the current system without reinventing the wheel or creating an unresponsive federal bureaucracy, it is more state-friendly than the more radical proposals under consideration.”
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