Agents: Federal proposal will be Trojan horse for optional federal charter

The National Association of Professional Insurance Agents recently reaffirmed its opposition to any proposals that call for a so-called “optional” federal charter for insurers.

“Those who want to dismantle state regulation of insurance and replace it with a federal government takeover are at it again,” said PIA Executive Vice President and CEO Len Brevik. “It is critical that we send out this early warning to the states, because not everyone may yet be aware that state-based insurance regulation is about to come under attack.”

A bill by Sens. John Sununu (R-New Hampshire) and Tim Johnson (D-South Dakota) calling for the creation of optional federal charters is expected to be introduced soon.

According to the PIA sources, a draft of the Sununu-Johnson bill calls for a federal insurance office to be established within the Treasury Department, and that this office–and the single appointed regulator responsible for its activities–would regulate solvency, market conduct and accounting for federally chartered entities. There are reports that the bill would authorize optional federal charters not only for life insurers, but for property/casualty insurers as well.

“Basically what you have are a handful of big banks and big life insurers pushing special interest legislation that will benefit them, but will be very detrimental to the states and to consumers,” Brevik said. “This is just the latest attempt to impose federal regulation of insurance.”

Brevik called attention to a closed-door meeting that occurred Feb. 1 at the Treasury Department. Administration officials summoned representatives of groups that support optional federal charters to the meeting, but no groups opposed were invited to attend. The Bush Administration has not taken a position on the issue of optional federal charters.

“The Administration needs to know that Main Street insurance agents, their customers and our states want choices at the local level, not another government bureaucracy in Washington, D.C.,” Brevik said. “Optional federal charters are unworkable by their very nature. Creating conflicting, competing federal-state insurance jurisdictions applying to the same marketplace is counterproductive to effective oversight of the insurance industry. PIA supports state regulation and opposes optional federal charters.”

PIA has initiated a nationwide campaign through its state and regional affiliates to get each state legislature to pass a resolution declaring its support for maintaining the states as the primary insurance oversight authority and regulator of the business of insurance, together with opposition to federal encroachment.

Brevik said the National Association of Insurance Commissioners is doing an excellent job in bringing about modernization of state insurance regulation through reforms it is spearheading. He added that agents agree that continuing changes are needed to modernize state insurance regulation.

In a survey of PIA members’ views on insurance regulation, an overwhelming majority, 83.6 percent said that having a federal insurance regulator is a bad idea, 88.3 percent expressed support for continuing the current system of functional state-based insurance regulation, 55.1 percent said changes are needed to modernize state insurance regulation, and a majority 51.4 percent said the proposed creation of a federal-level regulatory panel to coordinate, but not mandate, greater efficiency in the insurance marketplace as envisioned in draft legislation currently pending in Congress is a “Trojan Horse” for federal regulation of insurance. The survey was conducted 2004.

“State and federal agencies along with the NAIC have already invested millions of dollars in cooperative reforms required by the Gramm Leach Bliley Act which mandates states take the lead in collaborative efforts to effect modernization,” Brevik said.

PIA is a national trade association that represents member insurance agents and their employees who sell and service all kinds of insurance, specializing in automobiles, homes, businesses.

Source: National Association of Professional Insurance Agents