As president of the National Conference of Insurance Legislators(NCOIL), an organization of state lawmakers dedicated to soundinsurance public policy, I know first-hand the benefits of stateregulation for insurance consumers. NCOIL lawmakers care deeplyabout the financial security and protection of our friends,families, and neighbors.

We avidly support insurance reform and work toward necessarymodernization. We strongly believe that state officials–who aremore experienced and more in tune with the needs of theirconstituents–are the appropriate regulators of insurance. Weconversely believe that the federal government–which is lessexperienced in insurance matters, and more removed fromconstituents–is ill-advised in the recent efforts on the part ofsome federal officials to wrest regulation from the states in abarrage of schemes that include an optional federal charter forinsurers, a federal super-regulator for systemic risk, and aConsumer Financial Protection Agency, which for insurance woulddistance the protected from the protector.

We advocate state regulation because we understand theimportance of local communication and long-standing personalconnections. Insurance consumers expect electedrepresentatives–much like their insurance agents–to be accessiblewhen questions arise and abuses occur. They count on us to ensurethat their insurance companies can deliver. Particularly now, withconsumers struggling to manage their personal and financial lives,we can't weaken the bond of individual relationships.

For 150 years, the states have tailored a system based on theuniqueness of individual markets and constituencies and thesuccessful interaction between insurance businesses, policyholders,as well as their state regulators. State insurance departmentsprovide services to aid and educate consumers about insurance,while also conducting market conduct examinations to review companybehavior and compliance with state laws and regulations. Statelegislators have developed valuable consumer protections, includingunfair trade practice laws and guaranty funds to pay claims in theevent of an insurer's insolvency. The comprehensive state-by-stateframework of consumer protection and market conduct laws offersspeedy recourse to policyholders and the producers who representthem.

State legislators strive to provide the necessary tools toagents and brokers, who are entrusted to aid in consumerdecision-making. We try to ensure by legislation that producersmeet certain personal and professional standards. And as wecontinue to encourage enhanced reciprocity and uniformity inproducer licensing, we believe that state-based regulation is thestrong foundation that supports a very successful U.S. insurancemarketplace.

As compared with state successes, the federal government has apoor track record when it comes to financial services. This isevidenced by ERISA, the savings and loan crisis of the late 1980sand early 1990s, and FEMA mismanagement in the wake of Katrina andother major natural disasters. More recently, the U.S. mortgage andcredit default swap crises have placed us in a financial conditionrivaling that of the Great Depression. It was, after all, federallegislation that effectively exempted credit defaultswaps–transactions that, due to activity by its federally regulatedFinancial Products Division, led to the downfall at AIG–from stateand federal regulation.

Today, a system with a legacy of success is being challenged byuntried theory and unrealistic speculation. We should not fall preyto notions of reform that cannot live up to their expressedintentions. Those of us participating in the state insurancesystem–legislators, regulators, producers, and so many others–knowthe contributions we make to individual consumers and to thebroader financial markets. Our system has survived and thrivedbecause of–not despite–the fact that it is built on the principlesof accessibility, accountability, and community. As in the past, wewill continue to adapt to new products and new circumstances in aneven more rapidly evolving marketplace. NCOIL believes that now isthe time to stand up for state regulation and to declare thatpersonal relationships still matter.