IIAA Policy Shift Could Put Heat On State Regulators
The policy change by the Independent Insurance Agents of America to support federal legislation to help achieve the goal of state regulatory reform offers the possibility of accelerating the reform process, but needs to be fleshed out.
As it stands, the concept of using so-called “federal tools” to achieve reform, while maintaining full state-based control of the insurance regulatory system, raises more questions than it answers.
Depending on how intrusive the federal legislation will be, the resulting system may only be marginally better than what exists today.
For example, consider the implications of minimum federal standards for state regulation, one of the federal tools IIAA says it may support.
Minimum standards may reduce some of the variations that now exist among state insurance laws and regulations, but unless the legislation mandates uniformity, will it really solve the problem?
One of the major complaints voiced across the board from both insurance companies and agents is that they often have to comply with a multiplicity of different state regulatory requirements, such as for agent and broker licensing, that are not prudential in nature but simply reflect local idiosyncracies.
Complying with these different requirements, the complaint goes, adds unnecessary costs to the regulatory system.
Minimum federal standards may well establish certain parameters every state must follow, but if local variations are allowed, it would defeat one of the main objectives of regulatory reform.