The National Association of Professional Insurance Agents has reaffirmed its opposition to any proposals that call for a so-called “optional” federal charter for insurers.
“Those who want to dismantle state regulation of insurance and replace it with a federal government takeover are at it again,” said PIA Executive Vice President and CEO Len Brevik. “It is critical that we send out this early warning to the states, because not everyone may yet be aware that state-based insurance regulation is about to come under renewed attack.”
A bill by Sens. John Sununu (R-New Hampshire) and Tim Johnson (D-South Dakota) calling for the creation of optional federal charters is expected to be introduced soon.
According to the PIA sources, a draft of the Sununu-Johnson bill calls for a federal insurance office to be established within the Treasury Department, and that this office — and the single appointed regulator responsible for its activities — would regulate solvency, market conduct and accounting for federally chartered entities. There are also reports that the bill would authorize optional federal charters not only for life insurers, but for property/casualty insurers as well.
“Basically what you have are a handful of big banks and big life insurers pushing special interest legislation that will benefit them, but will be very detrimental to the states and to consumers,” Brevik said. “Let’s tell it like it is: There would be nothing ‘optional’ about optional federal charters. This is just the latest attempt to impose federal regulation of insurance. It’s a bad idea, one that needs to be put out of its misery once and for all.”
Brevik called attention to a closed-door meeting that occurred February 1at the Treasury Department. Administration officials summoned representatives of groups that support optional federal charters to the meeting, but no groups opposed were invited to attend. The Bush Administration has not taken a position on the issue of optional federal charters.
“The Administration needs to know that Main Street insurance agents, their customers and our states want choices at the local level, not another government bureaucracy in Washington, D.C.,” Brevik said. “Optional federal charters are unworkable by their very nature. Creating conflicting, competing federal-state insurance jurisdictions applying to the same marketplace is both
unnecessary and counterproductive to effective oversight of the insurance industry. PIA supports state regulation of insurance and opposes optional federal charters.”
PIA has initiated a nationwide campaign through its state and regional affiliates to get each state legislature to pass a resolution declaring its support for maintaining the states as the primary insurance oversight authority and regulator of the business of insurance, together with opposition to federal encroachment through creation of a federal insurance regulator or an optional federal charter.
Brevik said the National Association of Insurance Commissioners is
doing an excellent job in bringing about modernization of state insurance regulation through reforms it is spearheading. In addition, he noted that PIA members remain firmly supportive of the current system of functional state insurance regulation and are vehement in their rejection of a federal insurance regulator. At the same time, a majority agree that continuing changes are needed to modernize state insurance regulation.
In a survey of PIA members’ views on insurance regulation, an overwhelming majority, 83.6 percent said that having a federal insurance regulator is a bad idea, 88.3 percent expressed support for continuing the current system of functional state-based insurance regulation, 55.1percent said changes are needed to modernize
state insurance regulation, and a majority 51.4 percent said the proposed creation of a federal-level regulatory panel to coordinate, but not mandate, greater efficiency in the insurance marketplace as envisioned in draft legislation currently pending in Congress is a “Trojan Horse” for federal regulation of insurance. The survey was conducted September 23-29, 2004.
“State and federal agencies along with the NAIC have already invested millions of dollars in cooperative reforms required by the Gramm Leach Bliley Act which mandates that states take the lead in collaborative efforts to effect modernization,” Brevik said. “The American system of state-based insurance regulation has worked well for more than 100 years, producing an insurance sector that is the envy of the world.”
In addition, transferring responsibility for insurance regulation from the states to the federal government could have disastrous implications for state budgets. In 2004, insurance companies paid a total of $13.8 billion in annual premium taxes to the 50 states, according to the U.S. Department of Commerce.
Founded in 1931, PIA is a national trade association that represents member insurance agents and their employees who sell and service all kinds of insurance, but specialize in coverage of automobiles, homes and businesses.
SOURCE National Association of Professional Insurance Agents
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