Optional federal chartering of insurance companies is a long-term process that likely will take several years to accomplish, several members of Congress agreed yesterday.
At the first of a series of hearings on state insurance regulation and OFC, members of a House Financial Services Subcommittee cited numerous shortcomings in the current state regulatory system, but acknowledged that it will take a long time to develop a consensus on any federal action.
Rep. Richard H. Baker, R-La., who chairs the Subcommittee on Capital Markets, Insurance and Government Sponsored Enterprises, said his subcommittee had no specific legislative purpose in mind in beginning the hearings.
However, he said, it is evident that some regulatory reform is in order. The hearings represent the first step, Baker said. He hopes that the Subcommittee can put together some legislative recommendations before the end of the 107th Congress.
Baker noted that legislation is a long-term process, but he questioned how long Congress should wait before trying to act.
Witnesses representing the Downers Grove, Ill.-based Alliance of American Insurers and the Indianapolis-based National Association of Mutual Insurance Companies, urged Baker to judge state regulatory reform efforts by the amount of substantive progress, rather than according to a timetable.
But Baker responded that it seems to him that at some appropriate point, Congress will have to determine whether that has been identifiable progress and that it is time for Congress to debate the issue.
Rep. Paul E. Kanjorski, D-Pa., ranking Democrat on the Subcommittee, agreed that it will take several years to forge a consensus on what is a complicated set of issues.
But he said that insurance companies increasingly find themselves at a competitive disadvantage compared with federally regulated industries such as banking and security.
He noted that banks can usually bring a new product to market immediately, while securities firms can bring new products within 90 days.
“Insurers, however, sometimes have to wait more than a year to secure all the required approvals to offer a new product nationwide,” Kanjorski said.
One possibility, he said, is for the federal government to regulate insurers above a certain size or in certain business lines, while the states would retain responsibility for regulating the rest.
But in any case, Kanjorski said, consumers should be the ultimate beneficiaries of Congressional action.
Reproduced from National Underwriter Life & Health/Financial Services Edition, June 10, 2002. Copyright 2002 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.