NU Online News Service, March 29, 2004, 12:21 p.m. EST, Washington – Optional federal chartering could improve both consumer protection and competition in the life insurance marketplace, researchers say.[@@]
The researchers conclude that a dual insurance regulatory system, similar to the dual bank regulatory system, could streamline the product approval process, free more resources for consumer protection oversight and encourage smaller companies to compete in multiple jurisdictions.
The study was conducted by former U.S. Treasury Department official Sheila Bair, who is now a management professor at the University of Massachusetts, Amherst.
She released the study, which was funded by the life insurance industry, at a press briefing.
Bair says the current structure of insurance regulation resists the types of changes needed to improve competition and consumer protection.
She emphasizes that state insurance regulators exercise their duties with a high level of commitment and professionalism. However, Bair says, because the National Association of Insurance Commissioners, Kansas City, Mo., lacks legal authority over individual insurance commissions, it cannot force agreement on uniform standards.
Even if an agreement could be reached, it would be up to individual state legislatures to adopt the resulting model legislation, and the state legislatures likely would make their own modifications, Bair says.
As a result, Bair says, the current system for product review is cumbersome and inefficient.
Currently, Bair says, there are an average of 208 product filings per insurance department staff person per year. Bair says this heavy workload raises questions about the quality of product reviews.
Moreover, a survey of the 5 largest states in which life insurers do business shows that the average time for product approval ranges from 6 months to 9 months, Bair says.
Bair says the delays inhibit the ability of life insurers to modify products in response to consumer demands and impair life insurers’ ability to compete with banks and securities firms.
Similarly, Bair says, insurance department staffers have extremely high caseloads for producer licensing.
According to survey data, she says, there are 1,284 new license applications per staffer per year, which suggests that many applications may be receiving only cursory review.