By

Washington

The Independent Insurance Agents and Brokers of America is close to finalizing a federal legislative proposal that would maintain state insurance regulation but mandate more uniformity.

Thus far, the Alexandria, Va.-based IIABA, working jointly with some insurance companies, has developed tentative legislative language covering several major areas of regulation often cited as needing reform.

These include producer licensing, policy and form regulation, insurance company licensing, and state accreditation.

Reaction from life insurance company and agent groups has been cautiously positive.

Justin Roth, director for federal government affairs for IIABA, says the language is a working draft, and IIABA is still working with insurance companies and key legislators in order to develop a consensus document.

Since IIABA is interested in developing a consensus, Roth says, the language in the draft is still undergoing some tinkering, although he says not much more needs to be done.

There is no timetable for seeking formal introduction of the plan as legislation, he says, which probably will not happen until there is a consensus.

Roth says IIABA embarked on this approach because of the current push in some quarters for federal regulation.

Agents and companies are concerned with the current market, he says, but many believe that creating a new federal bureaucracy will only make matters worse.

The goal of IIABAs effort, Roth says, is to streamline insurance regulation and make it more uniform while maintaining the 150-plus years of insurance regulatory expertise on the state level.

Allen Caskie, chief counsel for federal relations with the American Council of Life Insurers, Washington, praises IIABAs efforts.

“We are encouraged that IIABA is looking for ways to enhance uniformity of regulation,” Caskie says. “They have put a good deal of work into their concept.”

However, Caskie says, ACLIs feeling is that simple incentives for states to become more uniform wont get the job done, although he says ACLI is still studying the IIABA draft.

“The only complete answer is a federal charter option,” Caskie says.

Commenting specifically on the producer licensing language, David Winston, vice president of government affairs for the National Association of Insurance and Financial Advisors, Falls Church, Va., says NAIFA is generally supportive of the effort.

However, he says, the draft is primarily written from a property-casualty perspective and does not address life insurance-specific issues of interest to NAIFA members, such as securities and life insurance dual licensing.

“The draft addresses some of our concerns but it still needs work,” Winston says.

Looking first at producer licensing, the IIABA draft language would generally bar a state from requiring a nonresident producer to acquire a local license unless the state adopts uniform licensing standards that will be developed by the Kansas City, Mo.-based National Association of Insurance Commissioners.

Under the draft, NAIC will develop uniform standards covering such issues as synchronized renewal times and mandatory use of the NAICs producer database for the licensing and background check process.

The NAIC standards would have to be approved by the Treasury Department.

In addition, the draft would bar states from imposing any discriminatory requirements or licensing fees on nonresident producers.

These include countersignature laws, requirements as to corporate forms and bonding or insurance coverage requirements.

Turning to policy forms, the draft would generally require states to disapprove a form within 30 days of filing, subject to one extension of 15 days to obtain additional information.

If the form is not disapproved, in writing, in that time period, the insurance company would be allowed to use it.

Turning to company licensing, the draft essentially creates a “port of entry” system which bars states from requiring an insurance company to acquire a local license if that company is already licensed by a state that is accredited by the NAIC.

However, the draft contains a federal backup. If a majority of states representing a still undecided percentage of the market have not achieved accreditation, or if the Treasury Department determines that NAIC has not implemented satisfactory accreditation standards, the Treasury Secretary may establish a new governing body to implement appropriate standards.

Finally, on market conduct, the draft requires states to provide insurance companies that fail an examination with a written explanation of the specific statutory or regulatory requirements that have been violated.

Federal district courts would have exclusive jurisdiction over litigation involving charges that a state insurance department has exceeded its authority.

The draft would allow states to enter into compacts to establish uniform market conduct examinations.

When finalized, the IIABA proposal is one of several insurance regulatory reform initiatives likely to be considered by the House Financial Services Committee later this year.

Supporters of optional federal chartering are also expected to present formal legislation.

The committee recently identified insurance regulation as a priority area for committee oversight. (See NU, Feb. 10.)


Reproduced from National Underwriter Edition, February 17, 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.