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Roadmap Hits Some Bumps

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Insurance regulation overhaul bill attacked by legislators and consumer reps

By Arthur D. Postal


The House Financial Services Committee is slowing its pace on action on the so-called “roadmap,” or insurance regulatory modernization legislation, citing the lack of time and the press of other, greater priority business, including a plan to push through legislation that clarifies and tightens the sale of life insurance on military bases.

The committee also plans to act on legislation that would extend the Terrorism Risk Insurance Act. The bill the House panel will take up will cover group life insurance.

It was learned at press time that the TRIA bill, including a group life provision, will be marked up by the full committee on Sept. 29.

One option regarding action on TRIA being considered by the congressional leadership calls for it to be added to the 9/11 Commission Report legislation that is considered a must-do by the leadership, either during the current session or during the lame-duck session following the election that the House Republican leadership says will have to be convened.

Regarding sales of insurance on military bases, legislation on the issue recently was introduced by Rep. Max Burns, R-Ga., which would specify the authority of state regulators over sales that take place on military bases in their states, and ban certain products from being sold on military grounds.

Rep. Steve Israel, D-N.Y., also had introduced a bill dealing with the issue, but that bill has been referred to the House Armed Services Committee. Rep. Rahm Emmanuel, D-Ill., also said that he planned to introduce a bill whose co-sponsor will be Sen. Hillary Clinton, D-N.Y. The Emmanuel/Clinton bill would ban sales of contract mutual funds.

House Financial Services Committee officials and lobbyists close to the issue say it is likely that a combination of the Burns/Emmanuel/Clinton legislation will be dealt with by the committee.

Staff officials and trade group officials close to the Financial Services panel last week denied that strong criticism of the plan from state regulators, legislators and consumer groups has had any impact on their game plan for action on the so-called SMART legislation, or the State Modernization and Regulatory Transparency Act.

They denied that comments by the leadership of the National Conference of Insurance Legislators that the role of the federal government in insurance regulation should be limited to such national issues as terrorism and catastrophe insurance had led to reconsidering how fast the legislation would move.

Under the current plan, the SMART bill will be introduced late this month, and an informational hearing will be held on it by the Capital Markets Subcommittee before Congress recesses by mid-October to campaign.

Instead, the panel will deal with the Terrorism Risk Insurance Act and legislation imposing greater controls on sales of life insurance at military bases, an issue that was the subject of a recent hearing by the panels Capital Markets Subcommittee.

Reps. Mike Oxley, R-Ohio, chairman of the full committee, and Richard Baker, R-La., chairman of the Capital Markets panel, are the current sponsors of the SMART bill.

Charles Symington, senior vice president of federal government affairs at the Independent Insurance Agents and Brokers of America, said, “The Big I continues to work closely with chairmen Oxley and Baker on the SMART legislation and will do everything possible to assist them in their desire to move the bill forward.”

Symington added, “What we are seeing is that some are criticizing the legislation because it goes too far, and others because it does not far enough; the Big I thinks the chairmen have struck the right balance.”

Joel Wood, chief lobbyist for the Council of Insurance Agents and Brokers, said the industry is not disappointed that no markup of the bill will be held this year.

“I think Reps. Oxley and Baker are on track to move a bill through the Congress, or at least the House, next year,” Wood said. “No one labored under the impression that a bill could be enacted this year.”

Wood added, “I am extremely comfortable that both Mr. Oxley and Mr. Baker have produced a bill that provides an excellent start at modernizing the industry and that this is the only politically viable opportunity for meaningful reform in the next few years.”

The TRIA extension will be dealt with by the committee through a bill introduced recently by Rep. Baker and Rep. Pete Sessions, R-Texas. It will extend the current legislation for 2 years, through 2007. An aide to Sessions said the representative is amenable to adding group life coverage to the bill. The current legislation authorizes the Treasury Department to include group life in the bill if the Secretary feels there is a need for such coverage, but the agency has rejected the appeal of group life writers to add that product to the areas the bill covers. Legislation extending TRIA was introduced in the Senate by Sens. Robert Bennett, R-Utah, and Chris Dodd, D-Conn.

Regarding SMART, NCOILs response was keyed to the quarterly meeting of the National Association of Insurance Commissioners then under way in Alaska. The letter was sent to Oxley and Baker. Baker played a key role in the drafting of the bill by the majority staff of the Financial Services panel.

In a letter signed by Florida State Sen. Steve Geller, NCOIL president, representing the groups executive committee, NCOIL said, it “cannot support” the SMART Act because “it could undermine the role of state legislatures in the development of insurance public policy and undermine the authority of state insurance commissioners.” In the letter, Geller told Oxley and Baker that state insurance commissioners “are elected in no less than 12 states, 2 of those states being the most populous in the nation.” It would “as well” undermine the authority “of state insurance commissioners who are duly appointed by their elected governors,” he said.

In general, Geller said, NCOIL cannot support any federal legislation that would encroach upon the states authority to develop insurance public policy. Federal intervention in the regulation of insurance would cast aside the insurance public policy expertise of state legislatures and state insurance regulators in favor of an untested and inflexible system.

A negative response to the legislation by the states was signaled some weeks ago in comments by Greg Serio, Superintendent of Insurance in New York and head of the NAIC government affairs committee. In general, Serio said that while the House panel had kept the NAIC informed of all its deliberations and the proposed roadmap, the NAIC had strong concerns about 2 key provisions of the draft roadmap, a provision calling for total rate deregulation, including a phase-in of personal lines deregulation, and a provision calling for an ongoing federal presence in state insurance regulation, a panel to be titled, “the State/Federal Partnership.” Under the bill, this would be a 7-member body composed of 3 state insurance commissioners, one from a large state, one from a small state and one from a medium-sized state, representatives of the Treasury Dept., the Securities and Exchange Commission and the Federal Reserve Board, and a chairman to be nominated by the NAIC and appointed by the President.

Consumer groups also are critical of SMART. The Consumer Federation of America, in a letter to Oxley and Baker, also timed to the NAIC quarterly meeting in Alaska, complained that, “Rather than increase insurance consumer protections for individuals and small businesses while spurring states to increase the uniformity of insurance regulation, this sweeping proposal would override important state consumer protection laws, sanction anticompetitive practices by insurance companies and incite state regulators into a race to the bottom to further weaken insurance oversight.”

The letter, signed by J. Robert Hunter, former Texas insurance commissioner and CFAs director of insurance, added, “It is quite simply one of the most grievously flawed and one-sided pieces of legislation that we have ever seen; a veritable wish list of items requested by insurers with absolutely no protections offered for consumers.”

Hunter also noted that “the consumers who will be harmed by it are our nations most vulnerable: the oldest, the poorest and the sickest.”

Reproduced from National Underwriter Edition, September 16, 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.


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