Optional Federal Chartering: Be Careful What You Ask For
The American Council of Life Insurers last month decided to formally pursue optional federal chartering for life insurance companies and agents who do business with them.
We don’t think too many people in the business were surprised by the decision of the ACLI board. It seemed almost a foregone conclusion that after such a prolonged period of study, the federal option proposal would be approved.
It’s also not surprising why the ACLI is pushing the proposal. Life insurers are understandably impatient as they watch federally regulated banks and securities firms bring products to market in 30-to-90 days, rather than the six-to-18 month wait they must too often endure under state regulation.
In addition, ACLI is not without its supporters in other areas of the insurance business. Among property-casualty groups, for instance, the American Insurance Association called the ACLI’s decision “a positive development.”
Yet, doubts linger. While the advocates of dual chartering argue that a competitive regulatory system would prevent either state or federal regulation from becoming overly burdensome, the reality might be quite different. Once Congress sinks its teeth into this issue, it has the authority to impose all sorts of new regulatory mandates on all insurers, whether state or federally chartered.
Robert Rusbuldt, CEO of the Independent Insurance Agents of America, warned about this risk when he said, “anyone following the federal insurance terrorism issue should realize that the legislative process rarely goes the way you want it to go. Anyone who thinks we will get a clean federal chartering bill is dreaming.”