Former CIAB Head Supports Federal Reforms

April 1, 2004

Albert R. Counselman, a past chairman of the Council of Insurance Agents & Brokers, told a House subcommittee that Congress needs to take action to remove the burden of multiple state regulatory requirements on insurance brokers and carriers in the interest of long-term viability of the industry.

Counselman, a CPCU and president and CEO of Riggs, Counselman, Michaels and Downes insurance brokerage in Baltimore, MD, testified at a hearing of the House Financial Services Subcommittee on Capital Markets, Insurance and Government- Sponsored Enterprises.

A bulletin issued by the CIAB noted that “Counselman said the road map to insurance regulatory reform introduced by Subcommittee Chairman Richard Baker, R-La., and House Banking Committee Chairman Michael Oxley, R-Ohio, is a critical step in ‘providing desperately needed modernization in insurance regulation.'”

He noted that, although the National Association of Insurance Commissioners “has attempted efforts to lead reform without federal involvement, the reality is that today’s marketplace demands far more dramatic action. The pace of financial services convergence and globalization are far outstripping the pace of individual reform efforts by state regulators and legislators.”

He cited the “inconsistencies and inefficiencies in the current state regulatory system” as “making the insurance sector less competitive than other providers of financial services sectors.

“Relief is needed, and it is needed now,” he told the lawmakers. “The council believes it is critical to the long-term viability of the U.S. insurance industry that Congress pass legislation to address the deficiencies of the state insurance regulatory system.”

In addition to the sweeping reform agenda outlined in the Oxley/Baker roadmap, Counselman told the House committee there are some relatively simple steps that could be taken to provide immediate and much-needed relief in the regulatory area. He outlined them as follows:
— Extending the NARAB provisions included in the Gramm-Leach- Bliley law calling for uniform agent and broker licensure laws or reciprocal laws on broker licensing to all 50 states. Although the majority of states have met the reciprocity provisions of NARAB, there still is deviation in the individual state statutes, and two of the largest states in terms of insurance premiums written – California and Florida — have not adopted the provisions. “Areas that would be good candidates for uniformity standards include the agent appointment process, continuing education and pre-licensing education requirements and criminal history reviews,” Counselman said, as well as license tenure and renewal dates.
— Improving the “speed to market” capability of insurance companies so they can offer new products in a timely manner and be flexible enough to meet the needs of a changing marketplace. Although more than a dozen states have eliminated these requirements altogether, many more require prior approval or the filing of rates and policy forms with state regulators before changes can be made. This “prescriptive” approach leads to duplication and over-regulation, Counselman said, and means it may take two years for a new product to be approved for sale on a nationwide basis. “This lag time for the introduction of new insurance products is unacceptable, and it is increasingly putting the insurance industry at a competitive disadvantage as well as undermining the ability of insurance consumers to access products that they want and need,” he said. Counselman said the council supports complete deregulation of rates and forms for commercial lines of insurance.
— Increasing access to alternative markets. Counselman said that although the purchase of surplus lines products is perfectly legal in every state, the regulatory structure that governs that coverage “is a morass,” making compliance difficult if not impossible. “My hope is that Congress can act to alleviate these problems by creating incentives or requirements for the states to rationalize their irrational surplus lines requirements,” he stated. Counselman also urged lawmakers to allow risk retention groups to provide coverage for property damage as well as liability exposures. “This would provide another alternative for businesses seeking economical insurance solutions in difficult economic times for the insurance industry,” he concluded

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