Congress Gets A Taste Of The Industrys
Huge Divide On Federal Regulation
As the Senate Banking Committee expressed new interest in the competitiveness and regulation of the insurance industry, testimony last week before the committee illustrates the huge divide within the industry as to what should be done to make it more competitive.
For example, in its testimony, the Independent Insurance Agents and Brokers of America said Congress can play a “vital role” in reforming the state insurance regulatory system, but that role should be “targeted and limited.” On the other hand, a representative of the Financial Services Roundtable, an umbrella group whose members come from all segments of the financial services, used the occasion to voice support for an optional federal charter.
Both comments were made at a Senate Banking Committee hearing, “Examination of the Gramm-Leach-Bliley Act Five Years After Its Passage.”
Their comments took on more importance because, during the hearing, Sen. Richard Shelby, R-Ala., chairman of the panel, surprisingly said, “Later this year, I am planning to bring the regulators before the committee to complete our discussion about the law. We also plan to hold further hearings concerning the state of the insurance industry in the post-GLB environment.”
Shelbys comments were surprising because the greatest initiative in insurance regulatory reform has been in the House, where Reps. Mike Oxley, R-Ohio, chairman of the Financial Services Committee, and Richard Baker, R-La., chairman of the most important subcommittee on the panel, have held hearings and are now drafting legislation establishing a federal “roadmap” for involvement in insurance industry regulation. They are trying to balance the interests of the states, regulators, governors and legislatures, and agents groups, which support the current state-based system, and most large underwriters in both the property/casualty and life industries, who support the federal charter concept.
The IIABA, who drafted the so-called federal standards approach Oxley and Baker are embracing, is its strongest advocates. As Ronnie Tubertini, chairman of the IIABAs Government Affairs Committee, and also president and CEO of SouthGroup Insurance Financial Services in Mississippi, stated clearly, the state insurance regulatory system needs repair. He said the problems that congressional support can help with in fixing state insurance regulation “fall into two categoriesit simply takes too long to get a new insurance product to market, and there is unnecessary duplicative regulatory oversight in the licensing and post-licensure auditing process.”