Legislation enabling both federally licensed producers as well as insurers to conduct business nationwide free of state regulation was introduced last week in the Senate, prompting reactions in the industry ranging from positive to hostile.
The American Council of Life Insurers, for example, which lobbied heavily for prompt introduction of the bill, voiced strong support. The National Association of Insurance and Financial Advisors, however, was more restrained.
A NAIFA official said the trade group’s leadership was “studying” the bill. NAIFA says it supports overhaul of the insurance regulatory system in general but insists that any reform proposal it supports “must streamline the producer licensing process and meet certain consumer protections.”
State insurance regulators also weighed in with their views of the bill. (See related story, “State Officials Take Shots At OFC Proposal.”)
The National Insurance Act of 2006, S. 2509, would bar states from preventing or restricting state-licensed producers from selling, soliciting or negotiating insurance on behalf of national insurers.
Under the bill, state insurance laws would be preempted in general, but certain insurance laws would still apply.
Moreover, as stated by Sen. John Sununu, R-N.H., one of its sponsors, during a press conference to announce the bill’s introduction, “The premium tax structure that’s in place works for states and makes sense for states.” The bill, he added, “does not change that.” Sen. Tim Johnson, D-S.D., is the bill’s other sponsor.
The bill also makes no mention of health insurance.
It is expected that Sen. Richard Shelby, R-Ala., chairman of the Senate Banking Committee, will hold a hearing on the legislation by late May, although no formal action on the bill is expected this year.
The House Financial Services Committee has been drafting legislation creating “national standards” for state insurance regulation for several years; the bill is the State Modernization and Regulatory Transparency Act, or SMART. It is unclear if and when that bill will be introduced.
In comments April 6 at a press event, ACLI President and CEO Frank Keating said there are currently “three ships” in the water on insurance reform: SMART, the interstate compact and the OFC. “The SMART bill does not appear able to reach the opposite shore,” Keating said, adding that the ACLI has heard the bill “would not be enacted anytime soon.”
As stated by one industry lawyer involved in the process, “This is the first official shot across the bow in the effort to enact meaningful insurance regulatory reform. It promises to be a long process, but finally the debate has been engaged.”
Keating said, “The measure would bring the insurance regulatory system into the 21st century by giving insurance companies a choice between exclusive federal or state regulation.