Legislation was introduced on Sept. 28 in the House to create an optional federal charter that is being called a “companion” bill to similar legislation introduced in the Senate in April.
“I believe the time has come for both houses of Congress to address the inefficiencies in the insurance marketplace,” Rep. Ed Royce, R-Calif., said in introducing the bill, the National Insurance Act of 2006.
The bill “would create a federal regulatory agency within the Treasury Department; however, it would leave the current state regulatory system in place,” he added.
Seeking to assuage concerns voiced by critics after the Senate bill was introduced, Royce said that under his bill, “an insurance provider could choose to be regulated by the 50 states or by the Office of National Insurance.”
The concept, he said, is “not new,” noting that the “banking system has lived under such a framework for much of our nation’s history.”
Royce also said he “applauded” the efforts and leadership of Sen. John Sununu, R-N.H., and Sen. Tim Johnson, D-S.D., the authors of the Senate bill.
Several insurance industry officials said the bill makes only technical corrections to the Sununu/Johnson bill.
American Council of Life Insurers President and CEO Frank Keating said, “The need for this legislation is clear. Today’s patchwork system of state laws and regulations has fostered a system of inefficiencies that ultimately affects consumers’ access to the financial tools they want and need.
“Under the current regulatory structure, insurance products can languish for up to two years before being granted approval in every jurisdiction. An optional federal charter would accelerate the time it takes to roll out new products nationally, thus making products available to consumers in a timelier manner to address their financial needs,” Keating said.
“An OFC also would bring greater efficiencies to the market conduct examination and producer licensing processes,” Keating said. “The redundancies built into these processes drive up costs for insurers and provide no meaningful benefit to consumers.”
Keating also said international outreach would benefit from an OFC. “Because insurers lack a federal regulator, the industry is not adequately represented in trade negotiations, limiting our access to foreign markets. An OFC would help give our industry a voice at the negotiating table.”
Finally, Keating said that “while ACLI supports the creation of a federal regulator, we recognize that under an optional federal charter many companies will choose to remain state regulated. For this reason, we will continue to work closely with state regulators to promote uniformity, efficiency and stronger consumer protections at the state level.”