On Federal Chartering, Life Insurers Must Be Prepared To Go It Alone

On Federal Chartering, Life Insurers Must Be Prepared To Go It Alone

Next to taxation, optional federal chartering of insurance companies will likely be the major issue for the life insurance industry in the upcoming 108^th Congress.

So vital are the competitive concerns surrounding insurance regulation that the American Council of Life Insurers has termed regulatory reform a “survival issue” for life insurance companies.

Indeed, unlike their counterparts in the property-casualty side of the business, life insurers compete directly against banks and securities firms, industries that are able to bring their products to market relatively quickly and on a national basis.

Banks and securities firms do not have to negotiate a Byzantine system of differing state bureaucracies nor adjust products that are national in nature to meet myriad and often parochial state regulatory standards.

If life insurance companies that sell investment-oriented products are to hold their own in a fast-changing financial world, they must have a regulatory structure suited to this competitive reality.

That is why we are concerned that as the debate over OFC and regulatory reform unfolds, the needs of the life insurance industry may become entangled with the disunity that characterizes the p-c industry, to the detriment of life insurers.

Currently, life insurers are working with some p-c insurers, as well as banks and securities firms, in a coalition aimed at promoting OFC.

But while life insurers, banks and securities firms are largely united on the issue, the broader p-c industry is utterly fractured.

One major company association and one major brokers group favor OFC, while three other company associations and two agent groups are opposed.