NU Online News Service, June 25, 8:50 a.m. – State regulation is doing a good job, and that message needs to be delivered to Congress, asserts Frank Fitzgerald, commissioner of the Michigan office of financial and insurance services.
Fitzgerald is cochair of a working group of the National Association of Insurance Commissioners, Kansas City, Mo., that is developing an interstate compact draft that is expected to be rolled out to state legislatures starting in January 2003. The compact would establish a single point of filing for life insurance products.
The compact project is one of several initiatives state regulators are undertaking to streamline state regulation and reinforce the idea that it remains a relevant way to regulate insurance.
Fitzgerald says that what state insurance commissioners have managed to do over the past year is “a phenomenal achievement” and that work should be presented in “detailed and forceful testimony” to Congress and any one else questioning the effectiveness of state regulation.
Members of Congress have expressed doubt over the role of state insurance regulation. During a hearing last month of the House Financial Services Committee, some skepticism was raised over the ability of the NAIC to achieve necessary regulatory reforms (see NU, June 24.)
Fitzgerald says he believes that members of Congress still have an open mind about the effectiveness of state regulation.
Those who question how state insurance regulation is working, he says, should recognize the advances made in the last year and a half in streamlining regulation.
During that period, state insurance regulators have been working on more efficient market conduct oversight, development of a producer licensing system to respond to changes mandated by the Gramm-Leach-Bliley Act of 1999, and speed-to-market initiatives.
Speaking of the American Council of Life Insurers, Washington, Fitzgerald says that “on my darker days, I wonder if anything we can do would satisfy that association. Fortunately, I don’t have many dark days.”
The ACLI maintains that it wants to see both an optional federal charter and more streamlined state regulation advanced, as Bruce Ferguson, ACLI vice president-state relations noted.
In a written statement, Ferguson says, “We are grateful for the tireless work of Commissioner Fitzgerald and his fellow regulators to modernize the state regulatory system. When their efforts reach fruition, it will be a sunny day for everybody, especially life insurers and the consumers they serve. We believe that our strong support for these efforts and our pursuit of an option for a federal charter are complementary, not mutually exclusive, approaches to regulatory modernization.”
A recent survey commissioned and released by the ACLI found that only one-third of consumers know that life insurance is state regulated and only 11% would try to resolve a complaint against a life insurer by turning to state insurance regulators.
Additionally, ACLI Chairman Joseph Gasper testified before Congress that consumers would be protected under a system of federal regulation.
For those who favor regulating insurance through an optional federal charter, Fitzgerald believes it would be entirely different from the current way of doing things. “The ability to provide input would not necessarily be available to them,” he says.
What Washington is used to, he explains, is a system of statutory authorization in which rules are developed, put out for public comment and then finalized. “There is no reason to think that [insurance regulation] would be different.”
Fitzgerald says that a new draft of the interstate compact could be ready by the end of June and that further discussion will take place this month during a meeting of the National Conference of State Legislatures, Denver.
Among the issues he says are still being worked on are is the inclusion of long term care insurance in the compact as well as the role of consumer representatives in the management of the compact.