NU Online News Service, March 26, 2004, 5:40 p.m. EST, Washington – Massachusetts Mutual Life Insurance Company, Springfield, Mass., is supporting the Oxley-Baker proposal for reforming the state insurance regulatory system.[@@]
Rep. Michael Oxley, R-Ohio, chairman of the House Financial Services Committee, and Rep. Richard Baker, R-La., are calling for a limited approach to regulatory reform.
MassMutual, a longtime advocate of optional federal chartering, still believes that creating an optional federal charter is the appropriate long-term solution, according to Ken Cohen, MassMutual’s senior vice president of government relations.
But, if the Oxley-Baker proposal is successful, it will create a more dynamic and responsive marketplace, and it could be a very important step forward on the path toward creating an optional federal charter, Cohen says.
Critical topics still under discussion include rate regulation, enforcement and dispute resolution, Cohen says.
- Rate regulation: Rate regulation is mainly a property-casualty issue, not a life issue, but it remains a very difficult one for the House Financial Services Committee, Cohen says.
- Enforcement: Cohen says state regulators and insurers will have concerns about whatever mechanism is chosen. Some in the insurance industry would prefer to see the federal government enforce reforms by cutting the revenue of state insurance regulators that are out of compliance, but Cohen says MassMutual would prefer to see Congress come up with another enforcement mechanism. State regulators need resources to be effective, and the goal of reform is to promote efficiency, not to undermine effectiveness, Cohen says.
- Dispute resolution: The Oxley-Baker proposal includes a Federal-State Coordinating Council that will have some decision-making input or the ability to mediate disputes in certain contexts. But the council will not be a federal regulator. Oxley, Baker and their aides are continuing to think about ways to create an effective dispute-resolution mechanism, Cohen says.
What Oxley and Baker are trying to accomplish is unprecedented, and it will call for a lot of creating thinking from all the interested parties, including state regulators, state legislators and the industry, Cohen says.
Cohen says he hopes others in the life insurance industry will follow MassMutual’s lead and support the process.
The success of the process will be directly proportionate to the level of support it receives, Cohen says.
The critical issues, he says, are speed-to-market, rationalizing market conduct exams and creating an enforcement mechanism to promote participation by states in an interstate compact for product regulation.
“Legislation must be acted upon quickly and include decisive and significant reforms if we are to see any meaningful improvements in state insurance regulation,” Cohen says.