Life insurance carrier and producer groups are starting to give their reviews of the insurance regulation provisions in the U.S. Treasury Department’s new financial services “reform blueprint” report.
Treasury Department officials call for setting up a temporary insurance data-gathering office within the department, then setting up an Office of National Insurance that would give insurers and producers the option of choosing to come under the jurisdiction of a federal insurance regulator.
Eventually, officials say, the government should establish offices that would handle matters such as market conduct for all types of financial services products.
Rep. Paul Kanjorski, D-Pa., chairman of the capital markets subcommittee at the House Financial Services Committee, already plans to hold a hearing on the blueprint April 16, according to industry sources.
Frank Keating, president of the American Council of Life Insurers, Washington, has praised the provisions in the blueprint calling for the creation of an optional federal charter system.
“The proposal for change comes at a propitious time,” Keating says. “Congress will soon examine the causes behind the recent market turbulence and re-start its review of insurance regulation reform legislation.”
Studies conducted for ACLI suggest that an OFC system would lead to lower premiums for consumers, and authors of one study estimated an OFC system could save up to $5.7 billion, Keating says.
“ACLI is dedicated to improved efficiencies at the state level as well, so that these same benefits will be realized for consumers of companies that choose to remain state regulated,” Keating says.
Kenneth Cohen, deputy general counsel at Massachusetts Mutual Life Insurance Company, Springfield, Mass., says he likes the Treasury Department’s recognition of the important role that insurance plays in our financial system.
“We must take major steps forward — including the adoption of an optional federal charter for life insurance — if the American insurance industry is to protect the interests of consumers and remain competitive globally,” Cohen says. “An optional federal charter will finally create a U.S. insurance regulatory agency with the ability to both protect consumers and help ensure the overall financial health of our industry.”
Doug Mishkin, chairman of the National Association of Independent Life Brokerage Agencies, Fairfax, Va., says the group has long supported giving insurers and insurance producers the same access to a federal regulatory system that banks and securities dealers have enjoyed.
“The U.S. Treasury’s recommendation is a significant step toward improving industry standards in an efficient manner throughout the entire 50 states,” Mishkin says.
NAILBA members are licensed in an average of 31 states each, and simply maintaining the licenses costs an average of $12,600 and 347 hours of labor per member agency per year, Mishkin reports.
Jeffery Taggart, president of the National Association of Insurance and Financial Advisors, Falls Church, Va., says NAIFA simply wants to see improvements in the product introduction and agency licensing processes.
“NAIFA is open to considering any and all regulatory options that will allow our members to better serve their clients,” Taggart says.
The options could include the Treasury Department OFC proposal, the interstate product filing compact initiative at the National Association of Insurance Commissioners, Kansas City., Mo., or a new effort to create a national producer licensing board, Taggart says.