NU Online News Service, March 18, 2004, 5:41 p.m. EST, Washington – A top insurance trade group official says U.S. House Financial Services Committee Chairman Michael Oxley, R-Ohio, has sketched out a very rigid framework for regulatory reform.[@@]
The American Council of Life Insurers, Washington, wants to work closely with Oxley, but it has questions about his approach, according to Gary Hughes, a senior vice president at the ACLI.
Hughes was responding to a speech about insurance regulatory reform that Oxley delivered in New York at the spring meeting of the National Association of Insurance Commissioners, Kansas City, Mo. Oxley gave the speech at a meeting session that was closed to reporters.
According to officials who saw the speech, Oxley says his committee’s approach will involve a federal-state advisory council that will ensure that states implement all of the reforms. The proposed reforms will include efforts to help insurers get products to market faster and increase the uniformity of market conduct examinations.
Oxley has ruled out the creation of 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, this individual would have no regulatory or licensing authority, Oxley says.
By completely ruling out a federal regulator, Oxley has eliminated the most logical means of assuring state compliance, Hughes says.
Hughes says he does not expect people to be excited about the idea of the courts handling compliance.
Some executives in the property-casualty insurance industry are hoping federal preemption will bring about deregulation, but life insurers are interested mainly in reforms that would lead to uniformity in matters such as product approval standards and market conduct examinations, Hughes says.
Oxley mentioned that he was using a provision in the Gramm-Leach-Bliley Financial Services Modernization Act as a model for his own bill.
The GLB provision pushed states to approve uniform and reciprocal producer licensing arrangements by threatening to create a federal producer licensing agency, the National Association of Registered Agents and Brokers, if too few states adopted the uniform and reciprocal arrangements.
The constitutionality of the NARAB provision is questionable, but it has never been tested, Hughes says.
There are examples of the federal government using “tools” to force states to comply with federal standards, but federal agencies enforce compliance with those standards, Hughes says.