Adoption of an optional federal charter system could cut life insurers’ regulatory compliance costs about 55%.[@@]
Researchers at the American Council of Life Insurers, Washington, and Computer Sciences Corp., El Segundo, Calif., published that prediction Tuesday in a report on a survey of more than 100 life insurers that represent about 41% of U.S. life premiums.
The survey results suggest that life insurers pay about $1.1 billion to comply with state regulations, and that variations in state regulations may account for about $600 million of those state compliance costs, the researchers write in the survey report.”A life insurer opting for a single point of regulation addresses 2 of the key drivers of regulatory cost outside of the regulatory requirements themselves: Dealing with multiple regulatory jurisdictions and with non-uniform laws and regulations,” the researchers conclude.
A shift to an optional federal charter system might take years to phase in, because state regulatory standards might continue to apply to policies in force at the time of the shift, the researchers write.
But a shift could cut compliance costs at product development, producer relations and new-business operations more quickly, and those changes account for more than one-third of the total potential savings, the researchers write.
The American Council of Life Insurers, Washington, developed the optional federal charter proposal, which would give insurers a choice between state and federal regulation in 2000.
U.S. banks already have the ability to choose between state and federal regulation.
The new ACLI/CSC report “should prompt congressional action on our OFC initiative,” says ACLI President Frank Keating.
Members of Congress have been working on a draft of an alternative proposal, a State Modernization and Regulatory Transparency Act bill.
The SMART Act bill would mandate an overhaul of the state regulatory system, but it would leave the current state regulatory system in place, according to the ACLI and CSC researchers.