“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.