Legislation was introduced in the Senate on May 24 that creates a parallel federal system of regulation and supervision for insurers as well as agents and brokers that is similar to the dual banking system.
Bill S.40 was introduced by Sen. Tim Johnson, D-S.D., and Sen. John Sununu, R-N.H., and is based on legislation introduced by them in the last session of Congress.
“Our bill recognizes the clear direction the marketplace is taking,” Sununu said in introducing the bill. “Since last year, the question has become not whether an optional federal charter should be implemented, but when.”
He added, “Consumers will be the ultimate beneficiaries of this approach, enjoying more choices from companies that compete for their business by introducing new products, innovating in the marketplace, and acting in a way that responds quickly to their needs.”
The bill, “The National Insurance Act of 2007,” makes clear that insurers and producers would both be free to elect federal or state regulation, charters and licenses. Under the bill, states would maintain responsibility of regulating state-licensed insurers and producers.
Frank Keating, president and CEO of the American Council of Life Insurers, said in reaction to the bill, “Giving companies and agents a choice between a federal or state regulator would translate into a regulatory system that is far more responsive to the needs of today’s consumers and the life insurance industry than the inconsistent laws and regulations that are endemic to the current state-based system.”
The ACLI will support language in the bill “assuring that federally-regulated insurers offer the best consumer protections in the nation,” he added.
Keating said the legislation should take a “best practices” approach on consumer protections, “combining well-tested ideas from around the nation into a single coordinated and efficient system.”
“Why should policyholders facing similar risks and needs living in neighboring states not have the same policy choices and benefits?” Keating asked.
Timothy Flanagan Jr., general agent, Hinrichs Flanagan Financial, a MassMutual general agency based in Charlotte, N.C., voiced support for the bill.
“We applaud Senators Johnson and Sununu for taking steps to reform our system of insurance regulation and modernize a system of rules that was developed more than 100 years ago,” he said. “This proposed legislation is a win-win for the insurance industry and consumers, as it would bring enhanced value, efficiency and choice to the marketplace.”
The National Association of Insurance and Financial Advisors said its policy is to support efforts at the state or federal levels that will improve the insurance regulatory system.