The logic of an optional federal charter for regulating the insurance industry is “overpowering,” says Marc Racicot, former 2-term governor of Montana and now president of the American Insurance Association, Washington.
Racicot’s comment was part of a response to a recent letter from state legislators to the National Governors Association opposing an optional federal charter.
The National Conference of Insurance Legislators, Troy, N.Y. sent the letter to the NGA, Washington, Aug. 24, noting the costs of a federal insurance bureaucracy that would be established under the National Insurance Act of 2007 (S. 40-H.R. 3200), proposed legislation that would establish an OFC.
The NCOIL letter argued that “an OFC would set up a bifurcated regulatory system for insurance, put at risk important state revenue, nullify critical state-initiated consumer safeguards, and delay and deny important consumer access and recourse in problem times.”
The NCOIL letter also referred to recommendations from the AIA and the American Council of Life Insurers, Washington, supporting an OFC as “ill-advised.”
In his response, Racicot said that both he and Frank Keating, ACLI president and former governor of Oklahoma, have the perspective that “if it wasn’t good for the consumer, and there wasn’t a convincing case, then we wouldn’t try to be manufacturing one.
Bipartisan support for the bill by both Democrats and Republicans is testimony to the logic behind OFC proposals, Racicot said.
There is “an enormous effort on a global scale to eliminate trade barriers,” and an OFC would help accomplish this goal, he added.
A dual regulatory system of banking has existed since the Civil War and has worked “exceptionally well,” with 70% of the banks still choosing a state charter, according to Racicot.