The life insurance industry is “particularly ready” for the adoption of an optional federal charter, says a senior Democrat on the House Financial Services Committee.
Speaking at a March 31 hearing on insurance regulatory reform, Rep. Paul Kanjorski, D-Pa., cited the life insurance industrys standardized products and nationwide marketplace as the reasons why an OFC, similar to what exists for the banking industry, would work well.
“Rather than overlaying a federal bureaucracy on top of state regulation, an optional federal charter would create a separate, streamlined regulatory system,” Kanjorski said.
He noted that the committee is not yet considering OFC for life insurance, but he said a consensus continues to grow. The National Association of Insurance and Financial Advisors, Kanjorski said, decided to embrace certain federal initiatives that would work to improve the regulation of insurance, including an OFC.
But representatives of the National Association of Insurance Commissioners insisted that the interstate compact on life insurance regulation remains the best means to streamline life insurance regulation.
NAIC President Ernie Csiszar, the South Carolina Commissioner, acknowledged that the life insurance industry presents the best case for uniformity. He said the NAIC is on track to achieve reform before 2008.
But Kanjorski questioned Csiszar about whether OFC might not be better for consumers. If Congress created an OFC for life insurers, he asked, wouldnt that have a positive impact in that it would free up insurance department resources to regulate in problem areas?
Csiszar replied that he still has a problem with that. Consumer complaints occur at the local level, Csiszar said, and states can deliver at the local level. Moreover, he said, all the experience with insurance regulation is at the local level.
The interstate compact, he said, is the solution to the uniformity issue. Csiszar emphasized that this is not about turf protection. The issue, he said, is where can the job best be accomplished.
Kanjorski, however, responded that NAIC always seems to be 3 years, 5 years, 10 years from reform. It is already 5 years since Congress passed the Gramm-Leach-Bliley Act, he noted.
“Im starting to lose confidence that all 50 states are capable of coming together and solving this problem,” Kanjorski said.
Csiszar replied that the proof is in the pudding. “We must deliver,” he said.
If NAIC and the states have not delivered 5 years from now, he told the committee, “you can hammer me over the head.”
Committee Chairman Mike Oxley, R-Ohio, said he believes insurance regulatory reform will be impossible to achieve without congressional legislation.