The Independent Insurance Agents and Brokers of America released a statement saying it is concerned about an unexpected bill introduced in the Senate last week by Sen. Fritz Hollings (D-S.C.) that is the first legislative proposal in the 108th Congress addressing regulation of insurance.
The Insurance Consumer Protection Act (S. 1373) “takes a poor and very dramatic approach” to the matter, the IIABA said, by proposing to repeal the McCarran-Ferguson antitrust exemption and create a Federal Insurance Commission, which would exist as an independent panel within the Commerce Department.
The commission would be the sole regulator (with no option) of ALL interstate insurers offering property and casualty insurance as well as life insurance. Only intrastate insurers would continue to be regulated by the states. While the bill’s final language has not yet been released by the Senate clerk’s office, the few details that have been confirmed make it seem unlikely that any insurance trade association, even those supporting federal regulation, would endorse this bill. Even pro-federal regulation companies likely will find some aspects objectionable.
For example, the new commission would have full 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.
Finally, the IIABA said, legislation appears specifically disadvantageous to IIABA members because it would allow the commission to investigate the organization, business, conduct, practices and management of “any person, partnership or corporation in the insurance industry”—a definition that would presumably apply to independent agents and brokers. While it is unsettling for such a drastic legislative proposal to be introduced in the Senate, it could ironically provide a boost to IIABA’s middle-ground, insurance regulation reform approach.
Many CEOs of both large and small insurance companies are envisioning a dream federal regulation scenario, in which all rates and forms are deregulated and the current guaranty funds remain in place. However, when they learn the details of the Hollings bill, they may better understand that IIABA’s pragmatic approach is the only common-sense, realistic proposal to modernizing and streamlining state insurance regulation.
The Big “I” said it will be closely monitoring the Hollings bill and will provide more information and analysis about the legislation once its details are released.
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