Big ‘I’ exec tells agents federal charter is a ‘recipe for disaster’
If a mandatory or even an optional Federal Charter is implemented in Washington, D.C., it will be a “recipe for disaster,” says Charles E. Symington Jr., Independent Insurance Agents and Brokers of America’s senior vice president of Government Affairs and Federal Relations. As debates heat up in the Senate over the proposed National Insurance Act, Symington says the Big ‘I’ opposes federal regulation of insurance, optional or mandatory.
The industry’s biggest concern is where insurance should be regulated, on a state or federal level, Symington explained.
“You may not think it has much effect on your day-to-day operations, but it is starting to heat up and the outcome will play a big role in your future,” Symington said.
Symington says while IIABA remains a strong supporter of state-regulated insurance, “we recognize that state insurance regulation needs to be brought into the 21st Century.” He said agents and brokers across the country realize first hand the patchwork requirements that states oftentimes have and that these requirements can often be a burden to businesses.
That is why the Big ‘I’ supports targeted federal legislation working through the state-based system, supporting Mike Oxley, House Financial Services Committee chairman, and Richard Baker, who have proposed the SMART Act. The SMART Act maintains improved state insurance regulation, rather than the National Insurance Act, which would create an Optional Federal Charter system.
“SMART rides on the over 100 years of experience and model state regulators have regulating the insurance marketplace and does not throw out the baby with the proverbial bath water,” he said.
Symington said there is significant disagreement over where to take this debate. According to Symington, some of the large international insurance companies want to see an optional Federal Charter created that is aligned with the OCC and dual banking charter.
“They believe the state system is beyond repair and that it should be regulated in Washington, D.C.,” Symington said.
Symington pointed to the National Insurance Act, introduced by U.S. Sens. John Sununu, R-N.H., and Ken Johnson, D-S.D., currently under debate in the Senate Committee on Banking, Housing and Urban Affairs. Under the Sununu/Johnson proposal, a federal regulator would be appointed to head the Office of National Insurance, based in the Office of the Comptroller of the Currency. This would be housed in the Treasury Department, led by Commissioner of National Insurance, appointed by the President.
“What would this mean for you? How would this affect your day-to-day business operations?” and “Why does Big ‘I’ oppose it?” Symington asked.
Local regulation works best
Local regulation works best for consumers, Symington says.
“If a federal regulator is created in Washington, D.C., it will have a negative impact on your ability to represent your consumers and yourselves,” he said. “With the creation of a new Office of National Insurance in downtown Washington, D.C., agents would lose the capability of communicating with the state regulator and his or her staff, which you may know personally from many years of business.”
“Additionally, who do you think will have the ear of this new federal regulator? It will not be Main Street, it will be Wall Street. It will not be small business, it will be big business. It will not be independent agencies; it will be financial services conglomerates.”
Symington also noted that a dual state-federal structure created by a Federal Charter would be confusing to consumers and require independent agents to understand both systems of regulation.
Symington said the bill’s provisions would totally deregulate forms, explaining that an independent agent would have to compare forms for consumers. Legally this would drastically increase independent agents workload and legal exposure, Symington advised.
“It won’t be like comparing apples to oranges; it will be like comparing apples to oranges, peaches, pears and watermelons, and so-on,” Symington explained.
Symington said the National Insurance Act is not all bad, pointing out that for some larger agencies, the agent licensing reform does move the ball forward.
“However, in the end we feel the National Insurance Act will only lead to more burdensome requirements for our membership,” Symington concluded.
“We share many of the same goals, efficiency and uniformity for state insurance regulation,” Symington admitted. “But we prefer the SMART concept over the optional Federal Charter.”