ACLI Rebuts Pickens On His 'Fanciful Picture Of Progress'

Fact: In the 3 years between the NAICs adoption of its first “Statement of Intent” and the publication of its latest “Action Plan,” no tangible speed-to-market reforms have been implemented. The NAIC is now committed to addressing this issue through an interstate compact. And the progress? One state has adopted compactin a form different from the model legislation. Even if the NAICs new Action Plan achieves its stated goal, the states will spend 5 more years working to get only 60% of the states to adopt the compact.

Reflection: A federal charter option would result in a loss of premium tax revenue for state governments.

Fact: One look at national banks makes clear that federally chartered and regulated financial intermediaries continue to pay state taxes. The same would hold true for national insurers and is explicitly provided for in our draft legislation. Insurers would fund the cost of a new federal regulator out of their own pockets and not through the use of federal tax dollars (which, incidentally, insurers already pay).

Reflection: Proponents of federal regulation should support states efforts to improve regulation.

Fact: As the commissioner well knows, the American Council of Life Insurers and all national insurance trade groups have been and continue to be committed to working with the NAIC and the states to achieve improvements to the state insurance regulatory system. Our collective efforts would, however, be more productive if the states were unanimous in their commitment to improve key aspects of state regulation (e.g., support for the interstate compact). Moreover, it would be interesting to see what progress could be made if lobbying initiatives such as ASSURE devoted as much time and effort to supporting specific improvements to state regulation as they do opposing federal involvement.

Pickens other reflectionson the NAICs “SERFF” project, the impact of statutory reserve requirements, the cost of federal insurance regulation, consumer protections under an Optional Federal Charter, guaranty fundsare equally misleading.

For life insurers, regulatory inefficiency is nothing short of a crisis. Indeed, a recent poll of the ACLI Board of Directors ranked it as the top concern of CEOs. If we fail to deal with the issue appropriately, we run the very real risk of marginalizing the life insurance business. And we should all bear in mind that it is this business–and none other–that makes products available to consumers that protect against lifes uncertainties and acts as a principal source of long-term capital for the U.S. economy.

Regulators and regulated alike must address this issue with the utmost seriousness and commitment. Unfortunately, a letter like that of Commissioner Pickens, which represents not only his views but purportedly those of the NAIC, belies the grave nature of the situation and does nothing to add constructively to the debate.

GARY HUGHES
Senior Vice President & General Counsel
American Council of Life Insurers
Washington, D.C.

Reproduced from National Underwriter Life & Health/Financial Services Edition, December 12, 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.