Last week a study was released which argues that creating an optional federal charter for insurance companies would have little or no impact on state economies and any effects are more likely to be positive than negative.
The new study is being published as state lawmakers and regulators are joining together and ratcheting up their opposition to federal legislation–the National Insurance Act–that would create an optional federal charter for insurers.
In fact, one member of the group, the National Conference of Insurance Legislators, Troy, N.Y., was at press time scheduled to pass a resolution on March 1 voicing strong opposition to creation of an OFC by Congress.
The resolution says that an OFC “would eventually draw from the states the almost $14 billion of critical premium tax revenue they receive, bifurcate insurance regulation, result in a quagmire of federal and state directives, erode key consumer protections and compromise guaranty fund coverage, among other things.”
They are being supported by a private group based in Washington, D.C. and Birmingham, Ala., which is serving as a coordinator for agent and industry groups opposed to an OFC and which last week also reiterated its opposition to an OFC.
The coordinator of that group, the Coalition Opposed to a Federal Insurance Regulator (COFIR), issued a statement Feb. 22 expressing its “strong” opposition to a federal insurance regulator and optional federal charter legislation.
The study commissioned by the ACLI is titled “The Effects of an Optional Federal Charter for Life Insurers on State Economies.”
The study, conducted by Martin F. Grace and Robert W. Klein of the Center for Risk Management and Insurance Research at Georgia State University, found that the increases in competitiveness and efficiency that would be fostered by an OFC will likely benefit states by boosting economic activity and insurance industry-related employment.
While the employment changes would vary across states, and some states might experience a decrease, the impact would be relatively small, the study says.
The study seeks to counter arguments in the NCOIL resolution and a recent letter by Sandy Praeger, the Kansas insurance commissioner and president of the NAIC, that an OFC would cost the states billions of dollars in revenue and could potentially impact the jobs of the 11,000 people employed by states to regulate insurance.
Moreover, the letter by Praeger says, not only would an OFC create a new “bureaucracy,” but that federal regulators would employ far less people to regulate insurance.