Most life insurance trade groups are voicing strong support for the Treasury Department’s call for an optional federal charter in its blueprint for reform of financial services regulation.
“The optional federal insurance charter initiative took a dramatic leap forward as Treasury Secretary Henry Paulson included a recommendation in the blueprint for financial services reform to create an Office of National Insurance (ONI) within the Treasury Department,” said American Council of Life Insurers President Frank Keating.
“The proposal for change comes at a propitious time,” Keating said. “Congress will soon examine the causes behind the recent market turbulence and restart its review of insurance regulation reform legislation.”
The first hearing on the Treasury blueprint is likely to be held by the Capital Markets Subcommittee of the House Financial Services Committee April 16, according to industry sources.
In his statement, Keating said the ACLI “will stress the compelling case for an OFC and its importance to life insurers and their customers.”
He said the need “for an OFC is clear-and well documented.” For example, Keating said, “numerous studies conducted for ACLI point to lower premiums for consumers as a result of the creation of an optional federal charter.”
He said that in one study alone, improved efficiencies could yield up to $5.7 billion in savings. “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,” he said.
Doug Mishkin, chairman of the National Association of Independent Life Brokerage Agencies, said the group has “long supported federal regulation of insurance that would put the insurance industry on equal standing with other financial services industries.”
He added that “the U.S. Treasury’s recommendation is a significant step toward improving industry standards in an efficient manner throughout the entire 50 states.”
NAILBA member agencies are licensed, on average, in 31 states, according to a survey conducted by NAILBA last year, Mishkin said.
“As a result, these small businesses must be aware of and remain in full compliance with the differing insurance regulations that exist in each state, costing them, on average, $12,600 per year and 347 hours of staff time,” he explained.
At the same time, the National Association of Insurance and Financial Advisers issued a statement saying it will continue to survey its members as to their views on the appropriate regulatory oversight for the industry going forward.
Jeffery Taggart, president of NAIFA, said any position “ultimately taken by NAIFA, has to serve the best interests of present and future customers as well as NAIFA members who serve them.”
Taggart said NAIFA’s first priority in any reform proposal is getting new insurance products to market much more quickly and less expensively than under current rules, and simplifying processes and reducing the licensing cost for agents wishing to serve clients across state lines.
“NAIFA is open to considering any and all regulatory options that will allow our members to better serve their clients, including NAIC’s interstate compact initiative on insurance product introduction, NARAB II, as well as the proposed optional federal charter,” Taggart said.