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"Will it never end?" I asked here a couple of months ago, commenting on the issue of federal versus state regulation of insurance, now at least a half-century old. I complained that the whole tired affair was handing me a decades-long headache. Shut up and move on, I implored.

Never one to take my own best advice, I'm about to weigh in again.

It was an eye-opener.

There's a good deal about this debate, as it's presently constituted, that I've come to accept, if not fully comprehend.

I do understand, for example, the need of larger national companies and multistate agents and brokers to simplify the process of entering markets in this country. For the most part, they've shown remarkable patience with the historic inability of state regulation to get its act together. Who can blame them for throwing up their collective hands in exasperation and opting for some kind of federal role to ease their plight?

I have a harder time understanding the other side of the debate, especially its ferocity. The Big I, we're told, "violently" opposes any involvement by the federal government in the affairs of the insurance business, even an "optional" federal charter, as is now proposed in the Senate. The opposition of the National Association of Professional Insurance Agents to that proposal is, if anything, even more "violent" than the Big I's.

"Violent" opposition to an "option"? What am I missing?

When the question arises, the proponents of state regulation, and state regulation alone, roll out the usual knee-jerk platitudes.

Soon we're talking about the "camel's nose in the tent," and as soon as you hop off that dromedary, watch out for all the red tape on the ground lest you trip and slide down "the slippery slope" into federal hell. The Washington politicos will turn the business into a political football in short order. Besides, hasn't state regulation served us well? Then they deliver the clincher, with a wink and a sly smile: America's favorite new four-letter "F" word, FEMA.

Much of this flies in the face of reality. State regulation has not done the job for many in this business, and, despite a good deal of hoopla, it has made little headway toward "modernizing" and "streamlining." How much more red tape can the feds provide than the morass of state regulation with its 51 sovereign jurisdictions? And last time I looked, oily politicians and bureaucrats were as thick as thieves in the state capitals as on the banks of the Potomac. One need look no further than Louisiana for proof of that. Then, too, there are as many success stories among D.C. agencies as there are FEMAs.

They say all politics is local, and many feel the same way about insurance. They're more comfortable with the simpler life at the grass roots, and I understand and respect that. For others that no longer works. I understand and respect that too.

The resolution to this argument lies in an "optional" federal charter option. It's time to embrace the "O" word.

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, 2006

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