The Association for Advanced Life Underwriting says it supports the concept of optional federal charter legislation that would give producers and insurers a choice between federal or state licensing and regulation.
After evaluating the advantages and risks of letting insurers choose between state and federal regulation, the AALU believes the advantages prevail, the AALU says.
Rep. Ed Royce, R-Calif., drew attention to the optional federal charter concept Sept. 28, when he introduced H.R. 6225, the National Insurance Act of 2006.
In a statement to members, the AALU, Falls Church, Va., says it “could be helpful for producers and clients to have a federal regulator with expertise on life insurance issues who has the same kind of credibility with Congress and the administration that the Office of the Comptroller of the Currency has on banking issues.”
On the other hand, the primary risk of OFC legislation is that “federal regulation of life insurance has not yet been tried and there could be significant harm if poor regulation results,” the AALU says.
“AALU does not currently believe this is likely, but it is important that risk be mitigated by the specifics of the national regulatory structure that is created and by ongoing regulatory choice for life insurance producers and carriers,” the AALU says.
The American Council of Life Insurers, Washington, is supporting the idea of OFC legislation.
The National Association of Insurance and Financial Advisors, Falls Church, Va., is staying neutral.
The Coalition Opposed to a Federal Insurance Regulator, a new group, is opposing the Royce bill.
COFIR members include the Independent Insurance Agents and Brokers of America, Washington.
Greg Wren, a state legislator in Alabama and executive director of COFIR, says H. R. 6225 and the Senate version, S. 2509, would dismantle a 135-year old system that is in place and operational in all 50 states.
“While we acknowledge that insurance regulation should be streamlined, we believe establishing another federal office to do so is not the answer,” Wren says.
“Taking power away from the states and centralizing it in Washington will only complicate issues for insurance companies, agents and brokers and, most important, consumers of insurance services,” Wren says.
COFIR favors reform of existing state insurance regulation “but believes empowering a federal regulator to oversee that reform is not a viable solution,” Wren says.
CLARIFICATION: The AALU emphasized after publication of an earlier version of this article that it does support the concept of passing OFC legislation.