NU Online News Service, Sept. 18, 11:15 a.m. — Washington
The life insurance industry cannot wait much longer for regulatory reform, according to a senior executive with Massachusetts Mutual Life Insurance Company, Springfield, Mass.
“We cannot stress enough the fact that the underlying problems and the need for action are immediate,” William Fisher, MassMutual’s general counsel, says in a formal statement prepared for a recent House Financial Services Committee roundtable discussion on insurance regulatory modernization. “Because of existing regulatory inefficiencies, the life insurance industry is at a competitive disadvantage today.”
Congress must act now to cure the regulatory inefficiencies, by establishing optional federal chartering of insurance companies, Fisher says.
An incremental approach, such as imposing a federal solution only if the states fail to act, is not the answer, Fisher says.
Fisher estimates MassMutual lost at least $80 million in sales in 2001 because of an inability to bring products to market more quickly.
“Unfortunately,” Fisher says, “the overall problem has not gotten any better in the meantime.”
MassMutual still must maintain 42 different versions of a typical universal life product because of differing state requirements, he says.
Moreover, Fisher says, during the past four years, the company has undergone 14 separate state market conduct exams. A 15th is pending.
Gary Hughes, general counsel of the American Council of Life Insurers, Washington, argued at the roundtable discussion that the slow efforts by the National Association of Insurance Commissioners, Kansas City, Mo., to implement its own reform agenda demonstrate the dangers of relying solely on state action.
Hughes, who spoke on behalf of the Financial Services Coordinating Committee, which includes the American Bankers Association, the Securities Industry Association and the American Insurance Association as well as the ACLI, says there are only a few initiatives under way to implement the NAIC’s blueprint.
Even the most pressing proposal, achieving speed-to-market through an interstate compact, is still in the drafting stage, he says.
The proposal has yet to be approved by the NAIC, and, even if it is approved, implementation would require action by the legislatures in 50 states and the District of Columbia, Hughes says.