Is Not A Moral Issue
This is my first personal commentary for the National Underwriters life insurance edition and Im afraid many readers will end up hoping it is my last. Thats because Im going to present a radical thesis: The venue of insurance regulation, whether state or federal, is an economic issue, not a moral issue.
That thought comes courtesy of Robert E. Vagley, president of the American Insurance Association, a major property-casualty company group, but its one the life insurance industry needs to consider as debate over insurance regulatory reform gets under way in the House Financial Services Committee.
The visceral reaction among many, particularly in the agent community, against any thought of creating a federal insurance office may run contrary to the industrys own business interests. The issue should not be cast in terms of state vs. federal, but rather which level and type of regulation is best suited to the task.
I understand why a lot of people oppose federal regulation and I agree with the oft-stated view that not all wisdom resides inside the Washington, D.C.-area beltway. But keep in mind the background of that sentiment.
It exists because a bunch of ivory tower bureaucrats with a myopic view of the world try to impose one-size-fits-all government mandated solutions on problems that are local in nature.
With life insurance, the concern is exactly the opposite. Life insurance products are essentially national in nature. An annuity is an annuity, from Maine to Hawaii, from Florida to Alaska.
But too often, the marketing of this national product is hampered by local regulations that are idiosyncratic in nature and not at all related to solvency or consumer protection.
A product that is national in nature calls for some type of national regulation. The next question is how that can be achieved. The states, working through the National Association of Insurance Commissioners, have been trying to achieve national uniformity, while maintaining individual state jurisdiction, but that is proving to be a tough nut to crack. The pace of change has been too slow for many.