Legislators Considering Resolution Opposing Federal Preemption

February 24, 2006

A proposed resolution reiterating opposition to federal initiatives that would preempt state insurance regulation will be considered Friday afternoon by the National Conference of Insurance Legislators during its State-Federal Relations Committee meeting at it spring conference in Weston, Fla. The State-Federal Relations Committee on NCOIL-NAIC dialogue will be chaired by Rep. Craig Eiland of Texas.

The resolution, part of NCOIL’s long-standing effort to assert the primacy of state oversight, would serve as a template for legislators to enact and distribute to their congressional delegation and other key federal lawmakers.

“The Resolution in Opposition to Federal Preemptive Insurance Regulatory Measures” recognizes that state governments are the proper entities to determine insurance public policy, as authorized under the McCarran-Ferguson Act of 1945, and says that states are the historic protectors of insurance-buying consumers. The resolution notes that local jurisdictions are more responsive to the needs of constituents and more knowledgeable regarding unique market conditions.

The resolution also warns that optional federal charter proposals and the State Modernization and Regulatory Transparency (SMART) Act now looming in Congress would create new “federalized” regulatory approaches that would subject consumers to untested and conflicting federal standards. The proposed schemes would straitjacket state legislatures, governors, insurance commissioners and attorneys general while jeopardizing the critical revenue that states receive from premium taxes. This is not, the resolution says, the way to effect appropriate reform.

Lawmakers in Ohio, Texas, Michigan, Rhode Island, New York, and North Dakota, among other jurisdictions, either have passed or are in the process of adopting resolutions urging Congress to keep insurance oversight a state prerogative.

According to language passed in Texas, state legislatures, NCOIL and the National Association of Insurance Commissioners “have recognized difficulties in the marketplace that have created regulatory hurdles in certain states or delayed speed-to-market of insurance products.” Adoption of model laws that address these concerns have made unnecessary any form of federal preemption,” the resolution says.

Previous NCOIL activity opposing usurpation of state authority include, among other things, legislative letter-writing and phone-calling campaigns and adoption of position statements. They follow NCOIL model laws on key elements of state modernization, including market conduct surveillance reform, rate deregulation, producer and company licensing, and speed-to-market for life insurance products.

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