Main Street insurance agents are facing an onslaught with a number of “Trojan Horses” suddenly appearing, all designed to help their competitors win over market share. That is the assessment of the President-elect of the National Association of Professional Insurance Agents (PIA) Kenneth R. Auerbach, Esq.
Auerbach made the comments during an address to the Maine Insurance Agents Association on April 28 in Portland, Maine. He outlined the various efforts that are currently underway by those who want to impose federal regulation of insurance and end its supervision by the states, efforts which agents generally oppose.
“We are witnessing a number of Trojan Horses being rolled up to our gates,” Auerbach told the Maine agents. “We have a so-called ‘optional’ federal charter. We have attempts to reclassify insurance products as banking products. We have a bill now before Congress to establish an ‘Insurance Information Office.’ And we have the Treasury Department proposing an insurance regulatory office as an ‘interim step.’ An interim step to what?”
“And bear in mind, all of these regulatory efforts must be funded – at the expense of the states and at the expense of Main Street insurance agents.”
Auerbach maintained that despite the arguments advanced by advocates of federal insurance regulation, of which a proposal for a federal Optional Federal Charter for insurers and some agents is only one part, what is really underway is a competition for market share by major players.
He said that federal regulation in general and the OFC in particular “are being pushed by a handful of large banks, securities firms and a few carriers who want to expand their market share by using a federal regulatory system to gain an unfair advantage over their competitors, particularly the regional and mutual insurance carriers that play such an important role in our industry, our agencies and in providing consumers with a wide variety of insurance products in an efficient marketplace.”
“Federal involvement is being marketed as a way of making insurance regulation more efficient, but the subprime mortgage meltdown occurred under federal regulation,” Auerbach said. “All at the same time that the insurance industry — which is under state regulation — remained on a firm financial footing, achieving record profits and lower prices for consumers.”
“So our question is, why would it be more efficient for the one sector of financial services that has prudently conducted its business to be subsumed into a federal regulatory structure that has failed in the supervision of banking and securities?” he said.
Auerbach said it would be easy to be negative and tear down someone else’s concept of a remedy, but PIA’s message is positive. “We offer alternative, common sense solutions. The state system of insurance regulation works well. Yes, it needs improvements. Yes, it needs more modernization. But we shouldn’t toss out a system that works well for our industry and consumers. All PIA members, together with their PIA affiliates, must continue to work together to achieve the needed reforms to the state system.”
Auerbach said that such common-sense reforms by the states are what is needed, rather than the creation of a dual regulatory system which would lead to market instability, an increase in litigation and fewer choices for consumers.
“The National Insurance Producer Registry is just one example of such state-based action,” he said. “Like many of you, my agency is licensed in many states. I long for simplified licensing. We have a solution in the NIPR and the Producer Licensing Model Act created by the NAIC. The NIPR has made interstate licensing much easier. It is in 47 states and can be in all 50 in short order. And importantly, the system has already been built and it’s fully funded.”
PIA is a member of the National Association of Insurance Commissioners’ Working Group on Producer Licensing.
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