Optional Federal Charter Supporters Clash With Opponents At Hearing
The life insurance industry made another pitch for an optional federal charter at a hearing of the Senate Banking Committee last week. But it was met by opposition from state regulators and consumer advocates.
Speaking on behalf of state insurance regulators, New York Superintendent Greg Serio argued that modernization of the current, state-based insurance regulatory system is “on time and on target.”
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For their part, representatives of life insurance companies criticized the current state of insurance regulation as burdensome due to the variations from jurisdiction to jurisdiction.
“Life insurers today operate under a patchwork system of state laws and regulations that lack uniformity and are applied and interpreted differently from state to state,” said Arthur F. Ryan, chairman and CEO, Prudential Financial, and chairman of the American Council of Life Insurers. “The result is a system characterized by delays and unnecessary expenses that hinder companies and disadvantage their customers.”
Also, many of these variations between states have been created with little or no reason behind them, noted Brian Atchinson, executive director of the Insurance Marketplace Standards Association.
“There are no logical reasons for so many different and inconsistent standards or to impose those extra and superfluous costs on companies and consumers,” he said.
Alan F. Liebowitz, president of Bermuda-based OMNIA Ltd., an insurance company affiliated with the Old Mutual Financial Network, and testifying on behalf of the American Bankers Insurance Association, echoed Ryans sentiments, noting that all sides of the industry have begun to realize the problems with the system.
“Virtually all industry participants and even insurance regulators have spent years detailing the failings of the state system and now are beginning to define appropriate solutions to the problem,” he said.
Ryan said the ACLI has been pressing for reforms to be made, with the goals of increasing speed to market, creating uniformity in agent licensing and making market conduct exams more efficient. The ACLI, he said, has been working with state regulators to achieve those goals, but at the same time also has begun work with Congress to achieve a federal solution, which, he said, “can ultimately best be achieved through an optional federal charter.”
Liebowitz sought to allay concerns that an optional federal charter would replace the state-based system, noting that the concept had worked in the banking industry.