A rift has erupted between 2 financial services trade groups over how best to modernize the insurance regulatory system.[@@]
In a statement Tuesday, the Optional Federal Charter Coalition, Washington, voiced “disappointment” and called “inaccurate” the reaction of the Independent Insurance Agents and Brokers of America, Washington, to a letter the OFCC sent to the Senate Banking Committee June 13.
The OFCC letter, signed by 135 financial services industry companies, says that the current insurance regulatory system is broke and that the most appropriate way to deal with the system is to provide companies with an option to have a federal insurance charter.
The letter sent by the so-called “Big I” in response says an optional federal charter is unnecessary and that legislation now being drafted by the U.S. House Financial Services Committee creating so-called federal standards for insurance regulation is more appropriate. The lawmakers working on the House “State Modernization and Regulatory Transparency” Act bill, or SMART Act bill, hope to introduce it before Congress leaves for its summer recess. The month-long recess is supposed to start July 29.
The SMART Act bill is being drafted by Rep. Michael Oxley, R-Ohio, chairman of the House Financial Services Committee, and Rep. Richard Baker, R-La., chairman of the committee’s Capital Markets Subcommittee.
When asked about the latest OFFC statement, the Big I denied any inaccuracies.
Members of the OFCC include the American Insurance Association, the American Council of Life Insurance and the Council of Insurance Agents and Brokers, all of Washington.
“The reaction of the Independent Insurance Agents & Brokers of America to our June 13 letter expressing broad industry support for an insurance federal charter option is disappointing and inaccurate,” the OFCC says in a statement released by the American Bankers Association, Washington. An ABA offshoot, the American Bankers Insurance Association, did most of the work in developing the letter and getting financial services companies to sign it.
“It is beyond dispute that major restructuring of the insurance regulatory framework is long overdue and that the status quo is no longer a viable option,” the OFCC says in the statement. “The rigid confines of the past work to the disadvantage of our customers and deny companies, agents and brokers the flexibility they need to compete effectively in today’s marketplace…. Indeed, insurance regulatory reform must be driven by the needs of our customers and by the demands of operational efficiency. The optional federal charter initiative does just that.”
Robert Rusbuldt, the Big I’s chief executive, says the trade group “strongly denies any inaccuracies in our characterization of optional federal regulation or the Oxley/Baker SMART proposal.”
In fact, Rusbuldt says, “we agree with the OFCC statement that, ‘Indeed, insurance regulatory reform must be driven by the needs of our customers and by the demands of operational efficiency.’”
But “we disagree with the OFCC on the means to obtain this goal,” Rusbuldt says. “We believe that targeted federal reform of the state system, proposed and supported by Chairman Oxley and Chairman Baker in the SMART Act proposal, makes much more sense for insurance consumers and for bringing about immediate efficiency in our regulatory system.
“Although we agree on the goals, because we disagree on the means to obtain those goals, it appears that the OFCC has made a false allegation that we are inaccurate. This is not about the number of supporters vs. opponents since agents and regional companies overwhelmingly oppose federal regulation of insurance. However, independent agents strongly support reform of the current system.”