It'd give an inveterate states rightist like Thomas Jefferson a splitting headache, chasing him up the mountainside to Monticello, there to hide his head under the blankets, this endless chatter over whether the states or the feds or both or neither should regulate the business of insurance.
Then again a man like him, fraught with incompatible contradictions, might be just the ticket to put this madness behind us once and for all.
This is a tired story and one that's difficult to comprehend. When I first arrived on the insurance scene, almost 40 years ago, Sen. Edward Brooke of Massachusetts was talking up a plan for the dual regulation of the industry. He wasn't the first, I'm sure, and the debate has ebbed and flowed periodically ever since, remorselessly, without end, and without resolution.
Now, the issue re-emerges, as if it ever went away, with the introduction of the National Insurance Act of 2006 in the Senate. Though no formal action is anticipated this year, we'll all be treated down the line to the typical spectacle of a divided insurance industry once again drawing a line in the sand and screaming across it in public. There hasn't been fresh thinking on the subject in generations. Don't expect it this time around either.
The new bill, wonder of wonders, would create an optional federal charter for insurers. It would create an Office of National Insurance to license and regulate producers and companies chartered under its provisions and to oversee market conduct and fraud activity within its purview.
Arrayed against one another, to the death it seems, are, on the pro side, the Council of Insurance Agents & Brokers, the American Insurance Association and the American Council of Life Insurance. On the con side, there's the Independent Insurance Agents & Brokers of America, the National Association of Mutual Insurance Companies, and of course the National Association of Insurance Commissioners, where jobs and culture are imperiled.
Straddling the fence are the life and health insurance agents, under the aegis of the National Association of Insurance and Financial Advisors, and the Property Casualty Insurers of America, traditionally a strong champion of state regulation.
The clamor and the temporizing over this issue is apparently too complex for simpler minds to embrace. State regulation of insurance clearly works for many smaller companies as well as agents and brokers who are comfortable with its simplicity, its connection to the grass roots of the business or who simply are philosophically opposed to the wisdom or efficacy of a federal bureaucracy intruding into its affairs. Then again, in a globalized insurance business it doesn't work at all for a large chunk of the market--national companies, foreign insurers looking to enter the U.S. market, and agents and brokers operating nationally or even on a multistate basis. To them, efforts to "modernize" to "streamline" the state regulatory system, under way for a decade and now embodied in the SMART Act languishing in the House, are hopeless.
The obvious answer is to afford a choice and to introduce a system, which has been largely successful for the banking industry, where each can be satisfied. Why is this so complicated? Why can't both factions be satisfied?
It's enough to give this Tom a headache too.
Pass the Excedrin please. Extra strength.
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.
June 1, 2006
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