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A Federation of Angst
The decades-long debate over whether the insurance business should be regulated by the states, the U.S. government or both seems at long last to be coming to a head and moving inevitably in the direction of some federal role in the industry's affairs. Some are hooting and some are howling over that prospect.
What generated the latest dustup was the release of the U.S. Department of the Treasury's "Blueprint for a Modernized Regulatory Structure," which backs an Optional Federal Charter for insurers, but which is likely still to take some time to enact. Treasury recommended the creation of a Federal Office of Insurance Oversight. In early April a bill to achieve just that was introduced by U.S. Rep. Paul Kanjorski (D--PA) chairman of the Capital Markets Subcommittee of the House Financial Services Committee.
The latest squabble is between the National Association of Insurance and Financial Advisors and the Independent Insurance Agents and Brokers of America, the so-called Big I. When NAIFA recently switched gears and moved from neutrality to qualified support for the optional charter, the Big I, an opponent of the OFC, questioned the wisdom of the move. That group said the charter will make a lot of life agents uneasy, especially those who represent more than one company. Butting heads too are the current president of the National Conference of Insurance Legislators, Brian Kennedy and Terri Vaughan, a past president of the National Association of Insurance Commissioners. Kennedy says the regulatory problem "merely needs tinkering" at the state level; Vaughan says attempts at uniformity have failed and that it's time for Treasury to step in. Between the other two property-casualty agent broker associations there is also disagreement. The National Association of Professional Insurance Agents "adamantly opposes" the Kanjorski bill, saying it would hand Treasury "broad authority to preempt state laws and set national policy," in the words of PIA President Len Brevik. The Council of Insurance Agents & Brokers, while expressing admiration for the NAIC's attempts to modernize and castigating NCOIL for standing in the way, nonetheless favors the federal option. And on and on it goes as it always has. For myself, I've long believed that an optional federal charter is the way to go. Advocates of state regulation, none more staunch than the members of the National Association of Insurance Commissioners, have had more than ample time to clean up their acts and show conclusively that theirs is the better way. They clearly haven't done that, though they've made enormous strides on uniformity issues since the NAIC presidency of George Nichols of Kentucky. These considerations outweigh the understandable fear of federal intrusion. The current situation is impossible. A dual regulatory system is the only recourse. After more than a half-century of feverish debate could it possibly be that this is an idea whose time has finally come? THOMAS J. SLATTERY a veteran editor and writer on industry affairs for more than 40 years, is also the managing director of Slattery-Esterkamp Communications, Baldwin, N.Y. August 1, 2008 Copyright 2008© LRP Publications |
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