IIAA Seeks Nat'l Standards, But Not Federal Regulation

Washington

The Independent Insurance Agents of America will pursue federallegislation to help create a more streamlined and modern stateregulatory system, but will continue to oppose any type of directfederal regulation, IIAAs board agreed.

The IIAAs board approved a new policy statement calling for theuse of “federal legislative tools” to help reform the stateregulatory system, while maintaining the full authority of thestates to regulate the business of insurance.

“Although the need for greater efficiency and uniformity instate regulation is clear, federal regulation goes toofar–equivalent to throwing the baby out with the bathwater,” saidThomas Ahart, president of the Alexandria, Va.-based IIAA.

Among the federal initiatives IIAA might pursue are federalminimum standards, national reciprocity or multi-state uniformity,federal incentives for states to harmonize their laws, andpreemption of certain state laws.

In an interview with National Underwriter, Robert A.Rusbuldt, IIAAs chief executive officer, cited two reasons for theboards decision.

First, he said, with the introduction of legislation by U.S.Sen. Charles Schumer, D-N.Y., and the expected introduction atpress time of legislation by Rep. John LaFalce, D-N.Y., there isstrong momentum behind federal regulation of insurance, which issomething that IIAA strongly opposes.

Second, he said, despite IIAAs opposition to federal regulation,the board recognizes that agents and insurers have legitimateproblems with how they are regulated today. “The status quo is notacceptable for those doing business across state lines,” hesaid.

IIAA, Mr. Rusbuldt said, wants to deal with the legitimateissues faced by multistate agents and companies while recognizingthat state regulation is preferable to federal regulation.

Among the issues that need to be addressed, he said, areproducer licensing, rate and form filing, privacy, and consumerprotection. In addition, he said federal legislation could addresscompany licensing, transaction reviews, corporate governance,market conduct exams, audits, solvency and guarantyassociations.

In some ways, Mr. Rusbuldt said, IIAA will ask Congress to dowhat the Kansas City, Mo.-based National Association of InsuranceCommissioners has been trying to do for several years–create anational, not federal, system of regulation.

He said that even though the federal regulation proposals on thetable today call for optional federal chartering, it is verydoubtful that Congress will enact what the industry wants. “Anyonewho thinks that the final proposal will look like what the industryhas drafted has not been following the terrorism insurancelegislation,” he said.

It is very likely, Mr. Rusbuldt said, that legislation willcontain community reinvestment requirements, anti-redliningrestrictions and consumer protection standards that the industrycould not easily accept. “There is no guarantee about what anyfederal legislative proposal will look like after it goes throughthe process,” he said.

Rather than creating a federal regulatory scheme, he said, thebest role for Congress to play is to bring efficiency andmodernization to a state-based system.

Mr. Rusbuldt said that prior to its policy change, IIAA quietlydiscussed the use of federal legislative tools to help modernizestate regulation with certain national companies and selectedregulators, whom he did not name. “This policy change does not comeout of right field,” he said. “We have been working on it formonths.”

The new IIAA policy was challenged by one supporter of optionalfederal chartering–the Washington-based American Council of LifeInsurers.

“We were somewhat surprised to see a proposal that, on its face,seems to have a much heavier federal hand in what is currently astate prerogative than any of the optional federal charteringproposals on the table today,” said Allen Caskie, ACLI's chiefcounsel of federal relations.

If IIAAs proposal is preemptive of state laws, he said, it willapply to all companies and limit the activities of all states. Ifthe federal standard is not preemptive, he said, IIAA is simplycreating a federal model law, which would be the same as whatexists today from the NAIC and which has the same drawbacks.States, he said, would be able to make individual changes in thoselaws that undermine the entire uniformity objective.

Reproduced from National Underwriter Property &Casualty/Risk & Benefits Management Edition, January 28, 2002.Copyright 2002 by The National Underwriter Company in the serialpublication. All rights reserved.Copyright in this article as anindependent work may be held by the author.

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