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House Committee Keeps The Pressure On State Regulators

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“How long should Congress wait?”

That is the dominant question raised by members of the House Financial Services Subcommittee on Capital Markets as it continues its examination of state insurance regulatory reform.

At a hearing on state insurance regulation, representatives of the National Association of Insurance Commissioners and state legislative groups updated the subcommittee on their progress toward achieving regulatory modernization.

Subcommittee Chairman Richard Baker, R-La., says reform is essential. The current system, he says, leads to unnecessarily high premium rates to consumers.

He raises the possibility of Congress taking a vote to give the states an opportunity to voluntarily adopt the regulatory modernization plan developed by NAIC by a certain time. If they fail to do so, Baker says, Congress would step in and mandate it.

Mike Pickens, the Arkansas commissioner and president of NAIC, says, however, that implementation of the NAIC regulatory modernization action plan is “on time and on target.”

“But how long should Congress wait?” Baker asks. “Two years? Twenty years?”

Pickens says the action plan sets deadlines for implemention of different reforms.

Some reforms, he says, will be in place by December 2003. Others, he says, such as the creation of an interstate compact for registration of life insurance products, are set to be in place by 2008.

But Rep. Paul Kanjorski, D-Pa., says that taking until 2008 to implement a national program is “too long and too late.” He says he would support federal legislation if the job is not done within the next year to 18 months.

Kanjorski says Congress might need to consider an optional federal charter for insurance companies.

But Pickens says it would take at least until 2008 for the federal government to get up to speed on insurance regulation if Congress adopted optional federal chartering legislation.

Moreover, Pickens questions the extent of support for OFC.

The concept is being pushed primarily by large banks and life insurance companies, he says.

Pickens notes that three of the four property-casualty company trade groups support state regulation.

Moreover, Pickens questions whether consumers really want to have to deal with a federal bureaucracy when they are having a problem with their insurance companies.

Spencer Bachus, R-Ala., says he is concerned that OFC would reduce state premium taxes, an important source of state revenue.

Pickens says that loss of state premium taxes is inevitable under an OFC system since Congress will have to find money to fund a huge new bureaucracy.

William B. Fisher, vice president with Springfield, Mass.-based MassMutual Life, says the interstate compact for life insurance that NAIC plans to implement by 2008 represents only partial uniformity.

By its terms, he says in prepared testimony, the interstate compact becomes operational only after 26 states, or states representing 40% of national premium volume, agree to participate.

While MassMutual supports the interstate compact, he says, its prognosis is uncertain.

The depth of support among individual state commissioners is not clear, he says, nor is it clear that state legislators will agree to a significant delegation of authority to a multi-state entity.

OFC, Fisher says, enjoys strong support across the life insurance industry and would achieve uniform and efficient regulation.

Fisher says states will not lose premium tax revenue under an OFC system.

For one thing, the life insurance industry supports maintaining state premium taxes on federally chartered insurers to the same extent they are levied on state chartered insurers.

Moreover, he says, elimination of state premium taxes would require an act of Congress, and he says he cannot conceive of Congress taking such an action.

In other news, by a 95-2 vote, the Senate approved legislation reauthorizing the Fair Credit Reporting Act, although life insurers remain concerned with the Senate bill.

The bill, S. 1753, would continue the current preemptions of state credit laws that are inconsistent with FCRA.

However, S. 1753 contains a provision that allows consumers to opt out of information sharing among financial institution affiliates for soliciation and marketing purposes.

This language does not appear in similar legislation previously approved by the House, H.R. 2622.

A House-Senate conference committee will work out the differences between the two bills.

Frank Keating, president of the American Council of Life Insurers, Washington, says ACLI will urge the conferees to take the approach in the House bill.

“Reasonable information sharing has served our nation and its people very well, providing consumers with unparalleled access to credit and innovative financial products that meet consumers financial needs,” Keating says.

He says he hopes the conferees are appointed soon and that FCRA reauthorization can be signed into law before the current system expires at the end of the year.

Reproduced from National Underwriter Life & Health/Financial Services Edition, November 7, 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.


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