Companies and Regulators Have Questions
By Arthur D. Postal
Washington Bureau Chief
While life insurance agents are broadly supportive of the so-called federal “roadmap” legislation unveiled recently by the House Financial Services Committee, the companies are still hammering out their position. Regulators also have their concerns.
A major concern of regulators with the life provisions of the legislationand their support is critical for the legislation to move forwardis with the title calling for creation of a “State-National Insurance Coordination Partnership.”
This concern was voiced last week by Greg Serio, New York Superintendent of Insurance and chairman of the National Association of Insurance Commissioners government affairs panel.
Regarding the title calling for a state-national partnership, Serio asked, “Why is it there? What is it supposed to do?”
The partnership establishes a 7-member panel composed of 3 insurance commissioners from each of small, medium-sized and large states, and “designees” of the Treasury Department, the Securities and Exchange Commission and the Federal Reserve Board. Its chairman will be nominated by the state insurance commissioners and appointed by the president to serve as chairman and break tie votes.
Representatives will be balanced between political parties and will rotate the site of meetings. The partnership will have two separate liaisons, one coordinating international insurance representation of the U.S. and another to analyze “the effects of national financial policy on the insurance marketplace.” This panel “will have no regulatory authority, but will promote uniformity, assess compliance with this act, mediate and resolve conflicts among government agencies, and conduct appropriate arbitrations of interagency conflicts.”
Moreover, it will not have a permanent office and will be allowed only one liaison per member and minimal clerical staff to ensure “the partnership remains only a coordinating entity.”
Serio explained that the problem with such a body is that it lacks a concrete format and structure. Therefore, it is not needed, he argued, because of changes in state regulation that are ongoing as well as the changes proposed in the bill.
Serio said the commissioners will meet this week in a conference call to discuss the legislation, but he did not indicate when they will meet with the House Financial Services to discuss their problems.
Timing is crucial, since the committee wanted to hold a hearing on the legislation this month and perhaps a markup in the Capital Markets Subcommittee by October. Congress only has 30 legislative days remaining before it adjourns relatively early in October because of the election.
While the ACLI and its members are warming to the bill because they realize the optional federal charter has little political support at this time, some type of ongoing federal involvement is seen as important to winning the support of the ACLI and its members to the bill.
Jack Dolan, an ACLI staff official, said the ACLI has found that “there are a lot of issues for us to review” in the legislation, which is called the “State Modernization and Regulatory Transparency Act,” or SMART. It has 17 titles and runs to 320 pages in its current form.
“The ACLI, which originally supported the optional federal charter, has been closely reviewing the “roadmap,” as it is informally called, recognizing that Chairman [Mike] Oxley, R-Ohio, provides the main route to insurance reform at this time.” Dolan added, “ACLI is looking to the roadmap for improvement in key areas, like speed-to-market and market conduct, as well as producer licensing.”
Ken Cohen, vice president for federal government political affairs for MassMutual and a member of an ad-hoc group of non-ACLI members that includes Metropolitan Life, UnumProvident and AIG, appeared more supportive. “We think that there are some real opportunities in the draft bill to achieve needed reforms in the state insurance regulatory process,” he said.
The two areas where Cohen sees the most progress are in the areas of market conduct and speed-to-market. And, while he and his group are still evaluating the other 15 titles of the draft bill, Cohen admitted that the “long-term goal remains an optional federal charter.”
Comments from the National Association of Insurance and Financial Advisors were more supportive, although its officials left the door open to suggesting changes by saying it will provide comments on the bill to the committee.
William R. Anderson, NAIFAs senior vice president of law and government relations, said, “Were specifically delighted to see that the proposal addresses producer licensing and will provide streamlined licensing standards and increased uniformity for agents and brokers. It will eliminate discriminatory requirements and excessive continuing education burdens, and will require full implementation and utilization of the NAICs national producer licensing database and the National Insurance Producer Registry.” He pointed out that NAIFA serves on NIPR board.
Anderson added that NAIFA also supports language in the draft that calls for coordinated electronic filing for agent and broker licensing applications for both new licenses and renewals. Anderson said NAIFA has been working on electronic filing of applications for producers licenses, in conjunction with the NAIC and NIPR, for a number of years. “And we look forward to this proposal, if enacted, creating a total electronic environment for agent licensing,” he said.
“Additionally, were pleased to see that the proposal addresses speed-to-market in the life insurance area. It will require a single point-of-filing, and review and approval for life insurance policy forms as well as updated uniformed laws and regulations governing the filing of content and the regulation of policy forms for life insurance, and that it will ensure full participation in the Interstate Compact Act, a proposal of the NAIC that NAIFA has endorsed from the very beginning and is continuing to work on for enactment by the states,” Anderson said.
Another provision NAIFA will support, he said, establishes an anti-fraud network, which was called for in legislation marked up by the Financial Services panel in 2001.
That provision creates a coordinated network of computer systems to share anti-fraud information, More importantly, Anderson said, “it will give financial regulators, including insurance regulators, access to the FBI federal criminal background information on insurance agents, a position that NAIFA has long advocated.”
The industry was told by House Financial Services Committee staffers that broad, bipartisan support would be needed if the industry wanted to see any legislative action on the bill this year. That action is likely to be only a markup before the Capital Markets Subcommittee, industry officials and congressional staffers believe. But even that action would give the bill a greater chance of being considered by the full committee and the full House at the beginning of the next Congress.
How the Senate will react, specifically the Senate Banking Committee, is unclear. Those interested in the bill say they will be better able to gauge Senate Banking Committee support for some action in the next Congress after a hearing on insurance issues the industry has been promised by panel chairman Sen. Richard Shelby, R-Ala.
The document released by the committee has not been introduced as legislation. It is merely an exposure draft designed to generate a reaction from interested parties, including state regulators.
Reproduced from National Underwriter Life & Health/Financial Services Edition, September 3, 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.