FEDERAL REGULATION IS NOT THE ANSWER
Nation’s largest insurance association reaffirms support for SMART Act
WASHINGTON, D.C., June 14, 2005—The Independent Insurance Agents & Brokers of America (the Big “I”) says a proposal to establish an optional federal charter (OFC) for insurance regulation is not the best or right solution for regulatory reform in the industry. The association respectfully takes issue with a letter from several financial services companies and state banking associations to the Senate Banking Committee in support of OFC.
“While the letter leaves the impression that many insurance companies support federal regulation, it has been our experience that the vast majority of insurance companies, and an overwhelming number of agents and brokers, oppose an optional federal charter for the insurance marketplace,” says Charles E. Symington, Jr., Big “I” senior vice president for government affairs and federal relations.
Although the proponents of OFC say it would not supplant state regulation, the Big “I” believes such an occurrence would be inevitable, to the detriment of consumers and producers.
“Some in the industry attempt to argue that an optional federal charter preserves states’ rights and would leave the state system intact,” Symington says. “But there are huge problems with OFCs and federal regulation. For example, the latest industry OFC proposal would force the state system to backstop federal chartered insurers – this is an unprecedented intrusion on state solvency regulation and potentially a huge detriment to consumers. There is nothing optional about that.”
“Supporters of OFCs also argue that an optional federal charter would preserve state premium taxes and that such revenue would continue to flow into state treasuries as they do now. If the federal government begins regulating the insurance industry, it won’t take long for this revenue stream to be diverted,” Symington adds. “In addition, the Big ‘I’ believes there would likely be many new conditions accompanying federal regulation, including the possibility of community reinvestment act type requirements, anti-redlining provisions, Federal Trade Commission oversight, rate regulation at the federal level, and much more.”
The Big “I” agrees there is no question that reform is needed in order to address many of the concerns listed in the letter, including “inconsistent and inefficient regulation” and others cited, but also believes that agents and brokers and the consumers they work with are better served by reforming the current system. This is why the Big “I” supports the proposed State Modernization and Regulatory Transparency (SMART) Act legislation that is expected to be introduced in the House this summer.
“We support the SMART Act for several reasons, including the fact that it would foster consistency among the individual states without creating a new, cumbersome federal bureaucracy or unduly burdening agents and brokers nationwide with onerous or dual regulations,” says Big “I” CEO Robert A. Rusbuldt. “When it comes to insurance regulation, consumers and insurance producers have many issues on the table. For example, agents who inevitably would represent both federally regulated and state-regulated companies would still have to be licensed in the states, in addition to also having to add a new federal license and education requirements. This just adds another layer of federal licensing and regulation. Consumers would have to know and understand which regulator their companies had for all of their coverages: their homeowners, auto, life, umbrella, business insurance and other coverages – consumers would be calling their state insurance department or a bureaucrat in Washington for different coverages. Congress doesn’t need to create a Bosnia-type situation for the consumer.”
Founded in 1896, IIABA (the Big “I”) is the nation’s oldest and largest national association of independent insurance agents and brokers, representing a network of more than 300,000 agents, brokers and their employees nationally. Its members are businesses that offer customers a choice of policies from a variety of insurance companies. Independent agents and brokers offer all lines of insurance—property, casualty, life, and health—as well as employee benefit plans and retirement products. Web address: www.independentagent.com.
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