Reacting to yesterday's introduction of a Senate bill toestablish federal licensing of insurers and producers, stateregulators and legislators questioned how such a measure will helpconsumers and improve state insurance regulation.

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The optional federal charter proposal titled the NationalInsurance Act of 2006 was unveiled by Senators John Sununu, R-NH,and Tim Johnson, D-SD.

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National Conference of Insurance Legislators immediate pastpresident State Rep. Craig Eiland, Galveston, Texas, said NCOILwill “completely and fully oppose it. It is not a consumer-drivenbill but a bill drafted by the industry, for the industry.”

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He said NCOIL will work with all state groups including theNational Association of Insurance Commissioners, the NationalConference of State Legislatures, National Association of AttorneysGeneral and the National Governors Association.

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But, even as he voiced opposition, Mr. Eiland questioned thebill's chances for success. He said he doubted that in an electionyear Congress would want to go home to their constituents and saythey are “supporting federal intrusion on states' rights.”

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Alessandro Iuppa, NAIC president and Maine insurancesuperintendent, said many insurance products are state specific anda lot of state law would have to be preempted in order to attemptto create a system that would be analogous to the bankingsystem.

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Mr. Iuppa noted that the creation of such a system is“hypothetical,” but said that if such a system were to bedeveloped, it would pose questions as to how families would becovered by insurance where one spouse is covered by afederally-chartered insurer and the other by a state-charteredinsurer.

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He said the bill also leaves open the issue of how well consumerquestions and complaints would be handled, which he said the statesdo a better job with.

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Susan Nolan, NCOIL executive director, asked, “How is the billhelping consumers?” She said the bill “isolates state legislatorsand commissioners from their constituencies.”

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Ms. Nolan questioned whether there has been any cost analysis onthe issue of federal chartering. “I understand a lot of businesshas an interest in this, but asked what it is allabout–streamlining business or taking care of the consumer?”

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According to Ms. Nolan, if state premium taxes are lost, itcould have a huge impact: $13 billion in premium taxes werecollected in 2003, she said, citing NAIC statistics.

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Mr. Iuppa questioned whether companies in a federal system wouldstill be eligible for credit for contributing to state guarantyfunds as is currently the case under the state system. Would stateshave any input on solvency? he asked.

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Mr. Eiland, on the question of premium tax revenue, noted statesthat “already have significant budget problems will have thoseproblems exacerbated with the loss of premium taxes.”

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