Companion legislation to a bill creating an option federal charter for insurers introduced in the Senate in May was unveiled in the House before it left for the August recess.
The bill, the National Insurance Act of 2007, was introduced by Rep. Melissa Bean, D-Ill., and Rep. Ed Royce, R-Calif., who said they had won a commitment from the Democratic leadership of the House Financial Services Committee to hold hearings on the legislation soon.
The bill has garnered support from 11 financial institution trade groups, including the American Council of Life Insurers.
In a statement issued as the bill was introduced, Bean said, “Regulatory obstacles currently discourage insurance innovation and nimble product development to capitalize on emerging growth markets.
“Eliminating the need to coordinate with 51 state regulators and accelerating the time to market potential will foster greater industry innovation and agility,” she added.
Both Bean and Royce noted that the current state-based regulatory system for insurance had created a $24 billion negative trade deficit in insurance markets in 2006, while banks, which have a group of federal regulators, have a substantial positive trade position.
The legislation creates a federal system of regulation and supervision for insurers as well as agents and brokers that is similar to the dual banking system.
Under the bill, insurers and producers would both be free to elect federal or state regulation, charters, and licenses and states would maintain responsibility for regulating state-licensed insurers and producers.
Unlike legislation introduced in 2006 in the Senate, the 2007 bill removes any reference to health insurance, but allows federally-licensed insurance producers to sell health insurance offered by state health insurers.
The bill, like its Senate counterpart, specifically directs the insurance commissioner to establish regulations barring unfair trade and claims practices.
It also states that national insurers, as a general rule, must belong to the state guaranty association in each state in which they offer insurance. The bill also says that if a state guaranty association does not provide policyholders with a level of protection equivalent to National Association of Insurance Commissioners model standards, a national insurer would be required to join the National Insurance Guaranty Corporation created under the law. This corporation would have separate accounts for property-casualty insurance and life insurance and, similar to state guaranty funds, would be post-funded with assessments of its member companies.
Other supporters of the bill include Agents for Change, the American Bankers Association, the American Bankers Insurance Association, the American Insurance Association, the Council of Insurance Agents and Brokers, the Financial Services Forum, the Financial Services Roundtable, the Life Insurers Council, the National Association of Independent Life Brokerage Agencies, and the Reinsurance Association of America.
In a statement, Frank Keating, president and CEO of the ACLI, said the bill “would modernize our nation’s insurance regulatory system” and would allow insurance companies and producers to choose whether to remain subject to the current state-by-state regulatory system, or instead, opt for a new, streamlined national system.
“Insurance companies and agents choosing the national system would come under a uniform and consistent set of laws and regulations,” Keating said.
“ACLI supports language in the bill assuring that nationally-regulated insurers offer the best consumer protections in the nation,” he added. “The legislation should take a ‘best practices’ approach, combining well-tested ideas from around the nation into a single coordinated and efficient system.”