Independent Agent AssociationsSay 'No Way' To Federal Charter Plans
If proponents of the creation of a federal regulatory system for insurance companies and agents are looking for supporters among the ranks of independent agents, they will be sorely disappointed.
Agent representatives from some of the states that write the most premium dollars in the country share the positions laid out by their national agent associations in opposing federal regulation.
The proposals put forward by certain insurance company groups, they say, would dilute both the power of state regulators and the influence of state agent associations in insurance issues, as well as undermine consumer protection and slow response to a particular state's unique insurance concerns.
The Independent Insurance Agents of America and the National Association of Professional Insurance Agents, both based in Alexandria, Va., have blasted such proposals in the past.
Under various plans submitted by such groups as the American Bankers Association Insurance Association and the American Council of Life Insurers, there would be a two-tier system of federal and state chartering, similar to the current banking system.
Most recently, U.S. Sen. Charles Schumer, D-N.Y., introduced legislation to establish an Office of the National Insurance Commissioner within the U.S. Treasury Department. Its purpose would be to run an optional federal chartering program for insurers and those agents looking to do business with them.
Insurers in favor of the two-tier scheme feel it would help speed their products to market because they would not have to get approval in individual states. Opponents have countered that the federal Gramm-Leach-Bliley Financial Services Modernization Act has not been given enough time to work and that companies are jumping the gun.
"It's premature to look at federal chartering when states are making remarkable progress meeting [the regulatory demands of] Gramm-Leach-Bliley," observed Ellen Kiehl, assistant executive director for the PIA of Connecticut, New Hampshire, New Jersey and New York, based in Glenmont, N.Y.
"We just don't feel this is a move in the right direction," according to Paul W. Babbitt, state national director of the Syracuse-based Independent Insurance Agents of New York, and chief executive officer of Niagara Buffalo, an insurance agency in Buffalo, N.Y.
They both complained that representatives from Sen. Schumer's office have not discussed the issue with state agent groups, an oversight agents plan to remedy during the year.
Members of New York's PIA are going to Washington, D.C., on March 14 as part of the national PIA's annual legislative summit, and congressional representatives will hear from their agent constituents on this issue during that session, noted Ms. Kiehl.
Mr. Babbitt said that IIANY is working closely with the state's congressional representatives and is looking to set up a meeting with Sen. Schumer. "He needs to sit down with the agents," Mr. Babbitt said. Additionally, IIANY will be holding its annual legislative conference beginning April 10.
Agents and their association representatives say the key players representing the position of agents to Washington are their national organizations. But all of the various parties in the agent community have made clear their desire for states to be the sole regulators of insurance.
"I like my chances of solving my own problems with my own state representatives in my own state capital," declared Thomas M. Cotton, president of Hugh Cotton Insurance in Orlando, Fla., and chairman of the Florida Association of Insurance Agents in Tallahassee.
While he understands the desire of insurers to get products out more quickly and cost-effectively via federal chartering, Mr. Cotton said the downside would be not only a loss in consumer protection, but also less attention paid to each state's unique insurance needs.
"I do not see where a federal program would be sensitive to each individual state," said Mr. Cotton, a view shared by Mr. Babbitt.
"There is a place for the federal government, such as in the case of establishing reciprocity [in agent licensing across states, via GLB]," Mr. Babbitt said. However, he added that while the federal government can play an important role, "it can[achieve regulatory goals] through federal encouragement instead of regulation. We don't need another bureaucracy in these economic times."
"A federal program would not help that much," according to Ernie Stromberger, executive director of the Independent Insurance Agents of Texas, headquartered in Austin.
He said states are working to make it easier for companies to get new products to market. He suggested that more states should follow the Texas approach, for example, in commercial lines, where companies can file forms with the insurance department and use them while awaiting approval from the commissioner.
"We don't see a need to change the current system," Mr. Stromberger said, adding that he did not feel state regulators are impeding insurers' business.
"I'm not sure that there's a problem that needs to be solved," he concluded.
Reproduced from National Underwriter Property & Casualty/Risk & Benefits Management Edition, January 28, 2002. Copyright 2002 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.
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