A new congressional proposal that would create a direct federal role in insurance regulation is being opposed by the Independent Insurance Agents of America (IIAA), according to CEO Robert A. Rusbuldt.
House Financial Services Committee Ranking Democrat John LaFalce (N.Y.) introduced the measure late last week. The plan would create an optional federal charter and accompanying federal oversight for insurance companies that choose that method of regulation. The proposal-the Insurance Industry Modernization Act-for the first time would subject insurance companies to Community Reinvestment Act requirements, enact an across-the-board repeal of the insurance industry’s McCarran-Ferguson Act limited antitrust immunity, and institute strong anti-redlining provisions for life and property-casualty insurance. Although there is no direct regulation of agents and brokers, the measure does create limited federal regulatory and enforcement authority over state-licensed agents and brokers who offer consumers policies underwritten by a federally regulated insurance company. IIAA, which is a supporter of state regulation, believes the LaFalce bill goes too far in attempting to correct the shortcomings of the current state-based regulatory system.
“IIAA believes that oversight of the industry is best done at the local level, but we also are realistic in understanding both the effectiveness and the inefficiencies of state regulation. There are problems,” Rusbuldt said. “We believe that Congress has a role to play in modernizing and streamlining insurance regulation. We do not believe, however, that the creation of a federal system that will compete with state regulation is in the best interest of consumers, the industry, insurance regulation and the federal government.” Last month during its winter meeting, IIAA’s National Board adopted a new policy statement that calls for the use of “federal tools” to bring about reforms that will create uniformity in the state-based regulatory structure, modernize the system, and streamline state oversight so that insurance companies and agents and brokers can conduct business in a more efficient and cost-effective manner.
“IIAA strongly believes that Congress should build on, rather than dismantle, the current state-based system,” Rusbuldt commented.
Under its new policy, IIAA proposes using “federal tools”-national 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. Leading industry concerns that would be addressed include producer licensing, rate and form filing/speed to market, as well as priority insurer issues such as company licensing, transaction reviews, corporate governance, market conduct examinations, audits and solvency 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.
“We will work with all interested parties on the creation of a pragmatic, middle-ground and meaningful approach that will affect reforms of the state regulatory system without tearing down the existing structure and starting over again from scratch,” Maria L. Berthoud, IIAA Senior Vice President of Federal Affairs, said. “We believe our policy outlines a workable alternative that will respond to the interests of many divergent members of Congress, industry groups and consumers.”
Leading up to the introduction of his plan, IIAA worked with LaFalce to address several agent and broker concerns.
“Ranking Member LaFalce is willing to listen to IIAA’s concerns and to make adjustments to his bill to protect consumers and address some of the agent and broker concerns, but we have a difference of opinion on the premise of this approach” Berthoud said.
Berthoud added that IIAA will continue to work with House Financial Services Committee Chairman Mike Oxley (R-Ohio); Capital Markets, Insurance and Government-Sponsored Entities Subcommittee Chairman Richard Baker (R-La.); LaFalce and all other interested members in addressing insurance reform proposals.
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