Insurance Weighs Heavily On Agenda Of House Financial Services Panel

By

Washington

The House Financial Services Committee plans an aggressive insurance-related agenda during the 108th Congress, including examination of state regulation, product approval and consumer protection.

In an oversight plan published last week, Committee Chairman Mike Oxley, R-Ohio, said the plan reflects areas where the committee and its subcommittees expect to conduct oversight over the next two years.

The insurance industry takes up a significant part of the plan, starting with insurance solvency.

The committee says it will continue its examination of the solvency accreditation program of the National Association of Insurance Commissioners, Kansas City, Mo., focusing on the steps taken by the NAIC to update the program since its inception in the early 1990s.

Similarly, the committee says, it will examine such issues as the quality of market conduct regulation, agent licensing and product approval.

In particular, the committee continues, it will consider what further measures might be necessary to promote uniformity in agent licensing.

As for product approval, the committee says it will evaluate efforts by the states to achieve uniformity, efficiency and timeliness in their review of forms.

This review, the committee says, will include an evaluation of the NAICs interstate compact proposal for life and health products.

More broadly, the committee says it will review various proposals for modernizing insurance regulation, including state-by-state improvements, coordination of state regulation through the NAIC, federal promotion of state uniformity and optional federal chartering.

The committee says it also plans to examine state consumer protection efforts.

Specifically, the committee says, it will examine such insurance marketing issues as the churning of life insurance, sales and marketing representations, coercion and pressure tactics, and product bundling.

In addition, the committee says it will consider legislation that addresses the problem of “ineffective regulation” in the area of viaticals, while at the same time encouraging the industry to provide consumers with a valuable service.

On the retirement front, the committee says it will examine the use of annuities, long term care insurance, insurance pension programs and other products for those contemplating retirement.

This focus, the committee says, will include hybrid insurance instruments that incorporate features of securities and banking products.

In addition, the committee says, it will examine whether state and federal regulators are adequately overseeing these products.

As for mutual funds, the committee says it will examine several issues to assure that shareholders interests are protected.

First, the committee says, it will look at current trends in mutual fund fees, including the adequacy of disclosure and whether better disclosure would promote fee-based competition.

Similarly, the committee says, it will examine portfolio transaction expenses and consider the benefits to shareholders of requiring that those expenses be included in funds expense ratios.

In particular, the committee says, it will examine the impact of enhanced expense transparency on churning by portfolio managers.

The committee says it will also examine revenue-sharing payments, also called distribution fees, made by mutual funds to brokerage firms to gain access to their brokers.

The issue, the committee explains, is the transparency of those arrangements, which may create conflicts of interest. It is possible, the committee says, that regulatory action is warranted.

The committee says it will also examine corporate governance and proxy voting.

On governance, the committee says, it will look at the actions of mutual fund directors to ensure that shareholders interests are being served.

As for proxy voting, the committee says, it will monitor implementation of the Securities and Exchange Commission rule requiring funds to disclose the votes they cast on behalf of their shareholders.


Reproduced from National Underwriter Edition, February 10, 2003. Copyright 2003 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.