Consumers and producers could benefit from the implementation of an optional federal charter system for the insurance industry, according to a study by Dr. Laureen Regan, an associate professor at Temple University’s Fox School of Business and Management. The study, titled “The Optional Federal Charter: Implications for Life Insurance Producers” and commissioned by the American Council of Life Insurers, finds that life insurance producers could save hundreds of millions of dollars each year in licensing fees under the OFC.
In addition to saving money, producers would benefit from uniform prelicensing requirements and continuing education. Dr. Regan’s study adds to the conclusions from another study by Steven Pottier, a University of Georgia professor. Pottier found that life insurers could save up to $5.7 billion annually in compliance costs.
“On average,” says John W. Felton IV, chairman of the National Association of Independent Life Brokerage Agencies, “brokerage general agencies spend $12,600 and 347 hours of staff time annually to be in full compliance with the differing insurance regulations that exist in each state.”
Regan’s study says producers could save $268 million to $377 million annually in licensing fees. Those cost savings, proponents of the OFC argue, would be passed on to consumers in the form of lower premiums.
Proponents of the OFC also point to the fact that only 30 states had joined the Interstate Insurance Product Regulation Compact, an agreement that would create a single-point system for approval of life insurance products, as of May 30, 2007.