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ACLI Witness Makes Case For Federal Regulation Option

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A top life insurance executive pleaded Wednesday for Congress to give the industry a choice between state regulation and regulation by a new federal agency.

Life insurers have a unique ability to create new products that can help consumers convert retirement savings into lifetime income streams, Christopher Condron testified here on behalf of the American Council of Life Insurers, Washington, at a hearing on insurance regulatory reform organized by the House Financial Services Committee subcommittee that oversees insurance.

“The most important thing that you can do to stimulate further breakthrough innovation from the life insurance industry is to address the regulatory barriers that so frustrate innovation,” said Condron, who is chairman of AXA Equitable Life Insurance Company, New York, a unit of AXA S.A., Paris.

“To encourage innovation it is important for there to be uniform standards, consistently applied and efficiently administered, with a minimum of duplication or redundancy,” Condron said. “The current state regulatory system meets none of these criteria.”

Condron argued that creating a federal charter option would make it easier for Congress to address issues such as data security and travel underwriting.

Even when the life industry itself takes the lead in efforts to protect consumers and regulators, like what the industry is doing, the industry still has a hard time getting anything done quickly, Condron said.

The industry has developed annuity disclosure templates, for example, but “we can only implement this beneficial disclosure by going to each state and working through their individual regulatory process,” Condron said.

Getting all states to use the disclosure templates may be impossible, and working with the states that will adopt the templates could take years, Condron said.

Walter Bell, Alabama insurance commissioner and president of the National Association of Insurance Commissioners, Kansas City, Mo., defended the NAIC’s reform efforts, noting that members’ markets “typically dwarf” the insurance markets in many European countries.

Pennsylvania, for example, has the 12th largest insurance market in the world, and its market is still larger than that of China, Bell told Kanjorski.

The NAIC’s System for Electronic Rate and Form Filing has helped to accelerate the filing process and eliminate many of the idiosyncratic state filing requirements that are cited as a reason for adopting the federal charter option, Bell said.

“The next time someone tells you an undocumented sob story about the pink paper and paper clips of the past,” Bell said, “tell them to leave the Pony Express behind and get into the 21st century.”

Rep. Paul Kanjorski, D-Pa., chairman of the Capital Markets, Insurance and Government Sponsored Enterprises Subcommittee, the subcommittee that convened the hearing, said he still has an open mind the optional federal charter issue.

“I may have inclinations toward pursuing certain reforms, but I have made no final decisions about how to implement such reforms and how to build a broad consensus that garners the support of many, not just a slim majority,” Kanjorski said.

But “the vast majority of interested parties in the debate on insurance regulatory modernization–myself included–agree that there is no longer a question of whether or not to pursue reform,” Kanjorski said. “The question we must answer is how best to achieve this reform.”

Rep. Richard Baker, R-La., was more critical of state regulation, and especially of the NAIC.

“As an organization, the one most likely to drag reform down is the NAIC,” Baker told Bell.

The NAIC has “an inability to create the political will” necessary to push reform through nationwide, Baker said.

Whenever NAIC representatives come to the Capitol for hearings, they promise reform is just a few years away, Baker said.

” ‘We’re 2 to 3 years away, we’re 2 to 3 years away,’ ” Baker said. “ You ought to put it to music; it’s a great song.”


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