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June 20, 2002 at 08:00 PM
Financial services trade groups are pressing Congress to enact legislation that would give life insurance companies an optional federal charter. Right now, life insurers–like all insurance companies–are regulated by the states, and the groups believe this puts life insurers at a competitive disadvantage to banks and securities firms.
Jack Dolan, a spokesman for the American Council of Life Insurers (ACLI), says that one of the most daunting tasks life insurers face is getting products to market. “It can take up to 18 months for [life insurers] to get approvals in the states for products that we want to launch nationally,” he says. “There are much briefer approval times for banks and securities firms.”
And life insurers also tend to dole out lots of money on office manpower, Dolan says, to keep up with varying state laws. Life insurers “have a lot of people in companies dedicated to ensuring agents are licensed throughout the country or in numerous states, and [who are] keeping abreast of all of the laws and regulations that affect them.”
The ACLI and other members of the Financial Services Coordinating Council–which includes the American Bankers Insurance Association/American Bankers Association, American Insurance Association, and the Securities Industry Association–declared their unified support for an optional federal charter for life insurers during hearings held on Capitol Hill over the past few weeks. The trade groups collectively told members of a House Financial Services subcommittee that optional federal charters would extend uniformity to the disjointed state-based regulatory structure. “The securities and banking industries have long been subject to regulation by the federal government,” the trade groups told Congress. “This system works because it protects the interests of consumers, regardless of where the product is sold or where the consumer resides.”
The ACLI currently supports two bills sponsored by Senator Charles Schumer ( D-NY), and Congressman John LaFalce (D-NY) that push for federal regulation. Schumer’s bill, which hasn’t been named, was introduced late last year, while LaFalce’s bill, H.R. 3766, the Insurance Industry Modernization and Consumer Protection Act, was introduced earlier this year.
