NU Online News Service

Life insurance carrier and producer groups are starting to givetheir reviews of the insurance regulation provisions in the U.S.Treasury Department's new financial services "reform blueprint"report.

Treasury Department officials call for setting up a temporaryinsurance data-gathering office within the department, then settingup an Office of National Insurance that would give insurers andproducers the option of choosing to come under the jurisdiction ofa federal insurance regulator.

Eventually, officials say, the government should establishoffices that would handle matters such as market conduct for alltypes of financial services products.

Rep. Paul Kanjorski, D-Pa., chairman of the capital marketssubcommittee at the House Financial Services Committee, alreadyplans to hold a hearing on the blueprint April 16, according toindustry sources.

Frank Keating, president of the American Council of LifeInsurers, Washington, has praised the provisions in the blueprintcalling for the creation of an optional federal charter system.

"The proposal for change comes at a propitious time," Keatingsays. "Congress will soon examine the causes behind the recentmarket turbulence and re-start its review of insurance regulationreform legislation."

Studies conducted for ACLI suggest that an OFC system would leadto lower premiums for consumers, and authors of one study estimatedan OFC system could save up to $5.7 billion, Keating says.

"ACLI is dedicated to improved efficiencies at the state levelas well, so that these same benefits will be realized for consumersof companies that choose to remain state regulated," Keatingsays.

Kenneth Cohen, deputy general counsel at Massachusetts MutualLife Insurance Company, Springfield, Mass., says he likes theTreasury Department's recognition of the important role thatinsurance plays in our financial system.

"We must take major steps forward -- including the adoption ofan optional federal charter for life insurance -- if the Americaninsurance industry is to protect the interests of consumers andremain competitive globally," Cohen says. "An optional federalcharter will finally create a U.S. insurance regulatory agency withthe ability to both protect consumers and help ensure the overallfinancial health of our industry."

Doug Mishkin, chairman of the National Association ofIndependent Life Brokerage Agencies, Fairfax, Va., says the grouphas long supported giving insurers and insurance producers the sameaccess to a federal regulatory system that banks and securitiesdealers have enjoyed.

"The U.S. Treasury's recommendation is a significant step towardimproving industry standards in an efficient manner throughout theentire 50 states," Mishkin says.

NAILBA members are licensed in an average of 31 states each, andsimply maintaining the licenses costs an average of $12,600 and 347hours of labor per member agency per year, Mishkin reports.

Jeffery Taggart, president of the National Association ofInsurance and Financial Advisors, Falls Church, Va., says NAIFAsimply wants to see improvements in the product introduction andagency licensing processes.

"NAIFA is open to considering any and all regulatory optionsthat will allow our members to better serve their clients," Taggartsays.

The options could include the Treasury Department OFC proposal,the interstate product filing compact initiative at the NationalAssociation of Insurance Commissioners, Kansas City., Mo., or a neweffort to create a national producer licensing board, Taggartsays.