By

Washington

There must be some mechanism to force states to establish uniform insurance regulation, but the 108th Congress will not consider creation of a federal regulator, Rep. Richard Baker, R-La., says.

Baker, who chairs the House Financial Services subcommittee with jurisdiction over insurance, says that Congress must do something about 56 varying systems of insurance regulation that inhibit the flow of the insurance product to consumers.

Speaking before the National Legislative Conference of the Independent Insurance Agents and Brokers of America, Alexandria, Va., Baker says that the present regulatory system inhibits competition, and consumers in many jurisdictions have fewer choices and pay higher premiums because of it.

Baker says that if an insurance company wants to put a new product on the market today, it must receive approval from 55 different jurisdictions that have different regulatory requirements.

No other products sold in America face a similar set of constraints, he says.

Baker notes that the Committee has identified some of the confusing and inconsistent state regulatory requirements faced by insurers.

One state, he says, requires policy numbers to be placed on the bottom left side of a policy, while most other states require the numbers to be placed on the bottom right. If a company gets it wrong, Baker says, the policy will not be approved.

One state requires documents to be stapled, he says, while another state bars staples.

One state requires certain policy information to appear on pink paper, Baker says, while another state demands white paper.

He says that during a recent hearing, even the South Carolina Insurance Commissioner, Ernst Csiszar, who is the current president of the National Association of Insurance Commissioners, Kansas City, Mo., was surprised that his state prohibits the use of parentheses.

Baker says he does not know the reason for all these variations.

“I think Im better off not knowing,” he says.

But he says something has to be done about it.

Baker and Financial Services Committee Chairman Mike Oxley, R-Ohio, have presented a roadmap to insurance regulatory reform that calls for using federal tools to mandate uniformity but would leave actual regulation to the states.

Baker emphasizes, on his behalf as well as on Oxleys, that this Congress will not consider creation of a federal regulator who would regulate insurance nationally.

But while he acknowledges that some enforcement mechanism would be needed to assure that states comply with any federal standards, he provided no details on what it might be.

Baker says, however, that the basic goal is to allow the free enterprise system to function.

The Committee, he says, is committed to improving insurance regulation. The Committee, Baker says, may not get it right at first, but it will be attentive and listen to the industrys concerns.


Reproduced from National Underwriter Edition, April 23, 2004. Copyright 2004 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.