By Patricia A. Borowski
While Congress’ insurance regulatory reform efforts appear stalled as 2006 begins, it is important to note that the states continue to move forward. These efforts require all the states to continue to move their efforts ahead in concert-as they have been doing with increasing success, aided by
the National Association of Insurance Commissioners.
As advocates of more federal involvement prepare to renew their push and the National Association of Professional Insurance Agents readies its opposition, here is a quick review.
Much has happened in insurance regulation over the intervening 29 years since Sen. Edward Brooke’s (R-Mass.) proposal for optional federal charters was first introduced that adds impetus to reform of our existing regulatory system. But the underlying cause for reform remains the same, albeit more urgent.
By enacting the McCarran-Ferguson Act in 1945, Congress permitted the states to continue their taxing and oversight of insurance. However, Congress did not give up its preemptive authority over insurance.
In the Financial Services Modernization Act of 1999, more commonly known as Gramm-Leach-Bliley, Congress once again decided to retain and expand the functional state-oversight structure for insurance that had been created under McCarran-Ferguson. It relied upon the National Association of Insu-rance Commissioners to achieve the legislation’s aims.
The current system
of insurance regulation consists of multiple federal venues, 55 state and territorial jurisdictions, and zone collaborations of NAIC oversight. PIA believes that each of these insurance oversight
venues is important and necessary. However, without more state and federal reforms, legal con-
flicts will continue, imposing an increasing and costly
burden, as well as compliance conflicts.
PIA Proposals
In May 2000, the PIA National Board of Directors adopted a national policy. It embraced functional state oversight of insurance to advance a more cohesive system. At the same time, it reaffirmed PIA’s opposition to a federal-only system, a state-by-state system that is dissimilar and non-coordinated (such a system doesn’t exist now), or a federal optional charter approach.
Under a federal optional charter, PIA agencies would represent both federal and state-chartered carriers with federal and state-regulated products and state and federal oversight rules. This traps independent insurance agencies and brokerage firms in the state-federal law and rules conflicts that already exist, and which we are trying to improve with these reforms.
The answer may be called national insurance standards. But enacting a coordinated system of national insurance standards can not be accomplished with a one-venue, one-proposal approach. It must include complementary action by all the states and regulatory bodies. This will involve multiple bills, not just one, and it will take years.
Yes, a lot of work and coordination.
Our approach is conservative, not radical. PIA has a series of suggested reform starting points that take their clues from the fine work already being done at the state, national and federal levels.
PIA believes this type of influential, collaborative and well-informed effort is possible and necessary. It has a proven track record of success.
This approach compliments and is not in conflict with the NAIC’s ongoing, successful efforts to advance regulatory modernization which, despite the usual grumbling from those who like to think that complex reforms can be enacted with one stroke of one pen, are moving expeditiously.
Those who may be tempted to over-simplify insurance regulatory reform and treat it as if it can be boiled down to one large omnibus federal bill are mistaken. There is no single silver bullet that at one time, and in one place, gets us all that we need. Those who propose that we go in such a direction are heading for a train wreck.
This is about keeping our business in business, keeping it competitive and able to meet our clients’ needs and our earnings goals.
Patricia A. Borowski is senior vice president of the National Association of Professional Insurance Agents. She can be contacted at patbo@pianet.org.