Legislation offers choice of federal, state charter

National insurance groups are split on whether rules should be updated to allow life and property carriers to choose federal rather than state charters in a system similar to how banks are regulated.

Legislation was introduced last week by Rep. Ed Royce (R-Calif.), a senior member of the House Financial Services Committee. A companion Senate bill was introduced in April .

Supporters of the measure say a federal charter would benefit consumers by providing access to a wider array of products at more competitive prices.

Opponents argue that individual states are best positioned to serve consumers, and that a federal regulatory authority - an insurance czar of sorts - would only create a massive new bureaucracy.

Royce said the challenges of complying with more than 50 jurisdictions has led to higher costs and less participation by insurers, Royce said. If enacted, the legislation would bring greater competition and lower premiums for consumers, he said.

"I believe the time has come for both houses of Congress to address the inefficiencies in the insurance marketplace," Royce said in a statement.

Under existing law, insurance companies are regulated by individual states.

Royce's plan would let carriers choose be regulated by the states or by the Office of National Insurance, a body to be created within the Treasury Department.

Insurance groups that oppose the move include the National Association of Mutual Insurance Companies, the National Association of Insurance Commissioners and the Independent Insurance Agents & Brokers of America, which held its annual conference in Charleston this week.

Opponents say states can respond faster to local market conditions and federal legislation would undercut state authority. Further, the legislation would do little more than create another level of bureaucracy for insurers and policyholders.

"Regulation closer to home is better regulation," said Alex Soto, the Florida-based president of the Independent

Insurance Agents & Brokers, who was in Charleston for the group's conference.

Eleanor Kitzman, South Carolina's director of insurance, said she's not a fan of the federal charter option because of the potential pitfalls. The change could allow multiple carriers to sell the same products but report to different regulatory authorities, she said.

Her preference is to establish uniform national standards that are administered by each state. That would bring the consistency that multistate insurers are looking for, she said.

"It's important to keep a state presence," she said, "particularly for consumer protection issues."

On the other side of the issue is the American Insurance Association, which called Royce's bill "vitally needed legislation."

"Such a system would be a great improvement over the present, patchwork state-by-state regulatory system, which has not kept pace with 21st-century marketplace needs," said Marc Racicot, president of the association.

Racicot's group said the proposed changes would make the market more efficient, increase choices and give consumers more conveniences. He also said the existing system would still be preserved because insurers wishing to remain under state regulation would have that option.

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BY PETER HULL
The Post and Courier

Reach Peter Hull at 937-5594 or phull@postandcourier.com.
 
 
This article was printed via the web on 10/4/2006 10:56:32 AM . This article appeared in The Post and Courier and updated online at Charleston.net on Wednesday, October 04, 2006.

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