Battle brewing over move to establish federal standards for state regulation
A big battle is brewing between the National Association of Insurance Commissioners and the leadership of the House Financial Services Committee over efforts in Congress to draft federal regulatory standards legislation.
NAIC officials say they are cooperating with the committee’s leadership and staff in the drafting of the State Modernization and Regulatory Transparency Act–better known as SMART. However, the committee’s Republican leadership apparently perceives that the NAIC is seeking to delay action on the bill to retain the current regulatory scheme, which emphasizes state oversight.
The issue is pressing because the committee has set a July 15 target date for action on the bill–and, apparently, the bill has bipartisan support.
In a letter dated May 16 to the NAIC leadership, Rep. Richard Baker, R-La., who chairs the panel’s Capital Markets Subcommittee, said that since all the NAIC could provide the committee was categorical denunciation of the committee’s own work product on the issue, he didn’t think it would serve any purpose for the leadership to meet with the regulator group until members submitted their own proposal for reform.
One congressional source called the letter “very strong.” The source, who opposes the legislation in principle, nevertheless says that for the committee to put its thoughts on paper in such language is “extraordinary and reflects the extreme disappointment of the committee at the recent actions of the NAIC in opposing modernization legislation.”
However, in a telephone interview, Diane Koken, president of the NAIC and Pennsylvania’s insurance commissioner, denied any lack of cooperation. “We are not attempting to delay anything,” she says. “We welcome opportunities to meet with committee officials and assist in any way.”
Koken says the NAIC leadership is aware of the July 15 target date for action.
The difficulty between the committee and NAIC leadership stems from the fact that state insurance commissioners–and probably governors and state legislators as well–believe the committee is seeking to reduce state authority.
In her comments to NU, Koken notes that her members support regulatory “modernization”–that is, compacts and other mechanisms initiated by the states that would create oversight uniformity.
By contrast, the House committee is drafting legislation that would establish federal standards for state regulation. This key difference was voiced in a May 9 letter signed by Koken that triggered Rep. Baker’s strong response.
“Our major concerns with the current draft SMART Act are centered on the organizational and legal structure it would employ to achieve the modernization goals we all share,” she wrote.
“Consequently, NAIC members believe we provide constructive assistance to you and your staff when we point out basic constitutional and operational problems associated with the SMART Act that would undermine its stated purposes and negate important state consumer protection laws,” she added.
“We also believe it is constructive to tell you upfront that certain SMART Act provisions, such as mandatory rate de-regulation, would be harmful to both consumers and industry,” she wrote.
Rep. Baker’s staff would not comment on the letter, nor would Rep. Mike Oxley, R-Ohio, who chairs the full Committee.
The letter from Rep. Baker implied that the NAIC leadership is seeking to delay indefinitely congressional action on insurance modernization legislation by not participating in the drafting of SMART.
The letter sought to delay further a meeting between Koken and Rep. Baker that had been scheduled originally for late April, and would have been a follow-up to a letter in which NAIC officials outlined specific criticisms of drafts of SMART. (See accompanying infographic.)