Not all agents oppose an optional federal charter
The Commissioners are now fully prepared to go before their various legislative committees with recommendations for a system of insurance law which shall be the same in all States — not reciprocal, but identical; not retaliatory, but uniform.
This statement expressing the desire for more uniform insurance regulation was made by George W. Miller, New York Insurance Commissioner and founder of the National Association of Insurance Commissioners, at the very first meeting of the NAIC in 1871.
Still today, a provider of insurance in multiple states is subject to regulation in each state, a time consuming and painful process at best. Each state must approve any new forms and products and license every provider and agent doing business in that state.
Agents for Change is a trade association of insurance agents and brokers from across all lines of insurance. Members of Agents for Change offer expert advice to public policy makers as they move forward to enact an optional federal charter to allow producers the option of being regulated at the federal or the state level.
Benefits to agents and brokers
The choice of allowing insurers to obtain a national insurance license can greatly benefit agents and brokers by providing uniformity of regulatory standards; eliminating rate regulation; and allowing new products to be brought to market more quickly.
Providing uniformity of standards
Under a federal charter, agent/broker licensing would be streamlined with a single licensing standard and a single license that would allow qualified producers to do business in all states. Regulatory costs for commercial insurance, automobile coverage, homeowners insurance, and the like would be reduced by having one policy form rather than the 30 or so different versions necessary today to do business in all states.
The NAIC can adopt models but cannot force state legislatures to enact them. Individual state insurance advocates can push for regulatory modernization in their own jurisdictions but they cannot force other state insurance advocates to push for similar change.
Eliminating rate regulation
Rate and price controls didn’t work for Richard Nixon and they haven’t worked for the insurance industry. States that over-regulate prices drive insurers from the market. This inevitably results in less competition, fewer choices, and higher prices for consumers.
Bringing new products to market more quickly
Insurers would have the ability to introduce innovative products in response to customer demand. Agents and brokers are losing money due to the inability of insurers to get new products to market in a timely fashion. Also, the present system provides no real basis to compare insurers by the products they offer. Freedom to market improvements would enable insurers to more effectively compete with other financial institutions that sell products serving the same consumer needs.
Benefits to consumers
As has been demonstrated in banking and securities, an optional federal insurance charter can benefit consumers by enhancing portability; promoting competition; providing uniform and consistent laws, and strengthening anti-fraud efforts.
Enhancing portability
Property owners who move from one state to another don’t understand why they have to evaluate different auto insurance or homeowners insurance in different states. Business owners expanding into another state have to select different policies and varying rates to meet the guidelines of each state. In today’s technologically advanced marketplace this makes no sense and costs consumers lost time and money
Promoting competition
Inefficiencies in the approval process in each state limit the variety of products that can be offered. Insurers can only get products to market as fast as each state bureaucracy allows. National standards would also help consumers compare policies that will be uniform nationally.
Providing uniform laws
Consumers dealing with a national insurer will enjoy the same availability of products and services in all 50 states. They will have equal protection under the laws, no matter where they reside. Streamlined regulations for insurers inevitably lead to lower rates and greater availability of products and coverages for consumers. A uniform regulatory system will eliminate needless paperwork and replace red tape with efficient regulation.
Better controlling fraud
With a national insurance advocate, a uniform system for background checks of agents and company directors could be more quickly integrated with both state and federal regulatory and law enforcement databases. This uniform system would enable rapid identification of “rogue” agents who move from one jurisdiction to another. The broader scope of a national advocate could also more easily identify and address fraud on a national basis.
For all of these reasons, we believe that an optional federal national insurance charter is important to consumers, insurance producers, and the insurers they represent. Please help educate members of Congress about the advantages of an optional federal charter.
Robert Poli serves as chairman of Agents for Change. He is the vice president of marketing for the Insurance Marketing Center, Rockville, Md. For more information, visit www.agents4change.net.