In early April, Senators John Sununu (R-N.H.) and Sen. Tim Johnson (D-S.D.) introduced a bill that would establish a federal program of insurance regulation that would operate in conjunction with the current state-based system.

Specifically, the act seeks to create a system of federal chartering, licensing, regulation, and supervision for insurers and insurance producers that is independent of the existing state system of insurance licensing, regulation, and supervision. Also, it would create a new government agency called the Office of National Insurance that would be funded by assessments imposed upon the insurance industry and would be led by a commissioner of national insurance.

The bill's introduction caused a stir in the industry. The Independent Insurance Agents and Brokers of America opposed the bill, claiming that the state system is more responsive and additional regulatory measures would overburden their members and unnecessarily impinge upon states' rights. Instead, the group is backing the State Modernization and Regulatory Transparency (SMART) Act, which they say would improve and modernize the existing system without creating another bureaucracy.

The National Association of Insurance Commissioners also expressed negative opinions about the program.

“The nation's state insurance officials share significant concern that this bifurcated regulatory regime with redundant, overlapping responsibilities will result in policyholder confusion, market uncertainty, and a host of other unintended consequences that will harm taxpaying individuals, families and businesses,” said NAIC president Alessandro Iuppa. “When our record of success is measured against the uncertainties of changing a state-based system that works well at no cost to the federal government, we believe Congress will agree that regulating insurance is best left to home state officials who have the expertise, resources, and experience to protect consumers in the communities where they live.”

Other associations that opposed the legislation included the National Association of Mutual Insurance Companies and the Property Casualty Insurers Association of America.

The American Insurance Association bucked the opposition trend, saying that the streamlined, rational regulatory system called for in the legislation would result in increased efficiency, more choices, and enhanced convenience for consumers. It went on to say that the state regulatory system would still be preserved and that insurers wishing to remain state-regulated could do so.

“AIA will work with Senators Sununu and Johnson, and other members of Congress to help show how much this legislation benefits the U.S. economy and consumers alike by creating a market-based insurance regulatory system,” said AIA president Mark Racicot.

Special Reports /

Federal Regulation Bill Draws Opposition

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