Optional Insurer Charter Bill Introduced

As for rate and form regulation, while the LaFalce bill would preempt state form regulation, it would not affect state rate regulation. Thus, states would still have the authority to oversee rates of national insurers that do business within their borders.

Called the Insurance Industry Modernization and Consumer Protection Act, the legislation, which does not yet have a bill number, would not directly regulate insurance agents or brokers.

Thus, state licensed insurance agents could sell insurance for national companies.

This contrasts with other optional federal chartering proposals on the table, which would require insurance agents to obtain a national license in order to represent national insurers.

However, the LaFalce bill would allow the regulator for national companies, called the Office of National Insurers, to enforce unfair and deceptive trade practice rules against agents and brokers with respect to insurance products issued by national companies.

Also in contrast with other proposals, the LaFalce bill would repeal the McCarran-Ferguson antitrust immunity for the business of insurance across-the-board, regardless of whether an insurer is nationally or state licensed.

As for market conduct, the legislation would incorporate the New York State laws related to unfair and deceptive trade practices and establish them as minimum standards that would apply to all states.

On community reinvestment, the LaFalce bill requires boards of directors of national insurers establish and follow a written investment policy, which must be reviewed and approved annually.

While the legislation would not require insurers to make specified investments, it does mandate that company boards consider the amount of investments in communities where the company does business.

As for data reporting, the legislation requires national insurers to identify the communities in which they sell insurance and the types of policies that are sold in those communities.

These reports, according to a summary of the legislation, could be used by consumers to combat redlining- the practice of avoiding sales in certain geographic areas based on population factors such as race and economic level.

In addition, the legislation bars insurers from refusing to insure a property or limit coverage based solely on its location or age.

Monte Ward, vice president of federal affairs for the Indianapolis-based National Association of Mutual Insurance Companies, said that promoting optional federal charter legislation will undermine the efforts already taking place to reform the state-based regulatory system.

"Besides undermining reform efforts, Rep. LaFalce's introduction of the Insurance Industry Modernization and Consumer Protection Act will significantly intensify the debate over the future of insurance regulation," Mr. Ward said.