A streamlined version of the State Modernization and Regulatory Transparency Act (SMART) that would give pre-emptive regulatory authority to home-state regulators is being drafted by staff of the House Financial Services Committee.
The purpose of the redrafting is to reduce the size and complexity of the bill substantively, with some seeing its size dropping from the current 300 pages to 60 pages.
Other purposes are to “jump start” industry interest in the bill by making it less controversial, and also out of concern that the moderate House approach to insurance regulatory reform is being crowded out by the optional federal charter legislation introduced in late April by two members of the Senate Banking Committee.
In general, the House bill is generating moderate support from the property/casualty insurance industry, but is being given a thumbs-down by the life industry.
The revised bill would provide pre-emption authority for home state regulators in terms of licensing, examination and product approval.
It would also eliminate the so-called “partnership” system in the current versions that would have created a federal office to coordinate insurance regulation with state officials.
Under the bill, Congress would establish certain “prescriptive standards” that state regulators would have to meet by a certain date, according to one lawyer who has seen the draft bill.
State regulators would have to execute these standards or face certain sanctions, the lawyer said.
It is being prepared for presentation to Reps. Mike Oxley, R-Ohio, chairman of the committee, and Richard Baker, R-La., chair of the panel’s Capital Markets Subcommittee.
A panel spokesperson confirmed “that there has been some redrafting,” but cautioned that no final decision has been made as to whether it will be introduced this year.
But an industry lobbyist familiar with the deliberations said the intent is to have it introduced this year.
Several lobbyists familiar with the redraft said they believed the current draft of the streamlined bill is likely to undergo extensive changes before the bill is introduced.
a recently formed group called Agents for Change, which consists primarily of life agents who are interested in regulatory reform,
“Moving to jump start the SMART bill and streamline it proves what we have known from the beginning — this policy proposal is fatally flawed,” said Peter Ludgin, newly appointed executive director for Agents for Change.
“Insurance agents and brokers want the option of being regulated by the states or the federal government,” Mr. Ludgin said. “It is as simple as that. This is about efficiency, speed to market, servicing customers across state lines, licensing hassles, competition in the marketplace, and ultimately, what is best for the consumer.
“Customers should not have to forgo their current relationships and seek a new insurance agent every time they move or open a business across state lines,”
At the same time, reflecting the fact that the property/casualty industry is more prepared to support SMART than the life industry, Joel Wood, senior vice president for government affairs at the Council of Insurance Agents and Brokers later added that, “I’m extremely confused as to why Agents for Change would call the SMART proposal flawed, and I say that as a supporter of the Optional Federal Charter.”
Wood said the SMART draft “would specifically address — and resolve — all the regulatory problems for agents and brokers in the surplus lines and licensure arena.
“Those are the two principal interfaces of agents and brokers with the regulatory processes, and any reform in those areas is greatly welcome,” Wood said. “I, for one, will follow the lead of Chairman Baker in supporting whatever approach he chooses to resolve these issues and insurance modernization in general.”