ACLI Has Many Questions
About Oxleys Approach
The American Council of Life Insurers wants to work closely with House Financial Services Committee Chairman Mike Oxley, R-Ohio, on insurance regulatory reform but has many questions about his approach, a senior ACLI executive says.
Gary Hughes, senior vice president with the Washington-based ACLI, says Oxley has outlined a very rigid framework for reform, and many aspects of it, particularly relating to enforcement, are problematic.
Hughes was responding to a recent speech by Oxley before the National Association of Insurance Commissioners in which the chairman discussed the approach his committee will take regarding insurance regulatory reform. (See story on page 6.)
Oxley says the approach will involve a federal-state advisory council that will ensure states implement all the reforms, including speed-to-market and uniformity in market conduct exams.
However, he rules out a federal regulator. While, for constitutional reasons, there might be a federal appointee who would be empowered to approve or disapprove recommendations made by the advisory council, Oxley says, this individual would have no regulatory or licensing authority.
Hughes says that by completely ruling out a federal regulator, Oxley has taken off the table the most logical means of assuring compliance by the states. Without a federal regulator, he says, the question is who will determine compliance. Perhaps it will be the courts, Hughes says, but that is not something people would be excited about.
Hughes notes that there are differences between the life industry and property-casualty industry. The p-c industry, he says, wants deregulation, which some believe can be accomplished by federal preemption.
But the life industry is not seeking deregulation but uniform regulation, he says. Life insurers need product approval standards, coordination of market conduct examinations and similar reforms.
While the reforms outlined by Oxley in his speech are positive, and under the structure he presented it is possible to figure out what should happen, there is still the constitutional question of how do you compel states to comply, Hughes says.
Hughes notes that Oxley mentioned the National Association of Registered Agents and Brokers (NARAB), which was part of the Gramm-Leach-Bliley Act, as a model for compliance under the legislation he is developing. However, Hughes says, the constitutionality of NARAB is questionable, and it has never been tested.
(The NARAB concept called for creation of a national registry of insurance producers that would streamline the producer licensing process unless a specified number of states enacted licensing reforms by a specified date.)
There are other models of the federal government using tools to force states to comply with federal standards. For example, he noted, the federal government forces states to comply with certain traffic safety rules by threatening to withhold federal highway funds.
But even so, Hughes notes, there is a National Highway Traffic Safety Administration to determine compliance, and that is the key.
The structure Oxley is outlining, he adds, carries a risk. If the machinery he proposes is established, and there is significant reform, that will be great. However, Hughes says, if it is done incorrectly, life insurers could be faced with an even more complicated regulatory structure.
ACLI, Hughes says, wants to work with the chairman and will examine the details of his proposal when they become available to see if something meaningful can be enacted.
Life agents, meanwhile, say they will examine the proposal.
“We praise Chairman Oxleys efforts to improve the insurance regulatory system and look forward to studying this proposal more closely,” says Randy R. Kilgore, president of the National Association of Insurance and Financial Advisors, Falls Church, Va.
Reproduced from National Underwriter Life & Health/Financial Services Edition, March 19, 2004. Copyright 2004 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.