Hearing Bares Insurers' Charter Split
By Steven Brostoff, Washington Editor
NU Online News Service, June 12, 3:12 p.m. EST, Washington?A conflict within the insurance industry over optional federal chartering erupted at a Congressional hearing yesterday, with one member of Congress suggesting that a "tiered" system, which would apply the system only to certain categories of business, might be in order.
The hearing by a House Financial Services Subcommittee revealed industry differences on two levels. The first was between the life insurance industry and the property-casualty industry, as even the p-c opponents of optional federal chartering acknowledged that life insurers have different problems than p-c insurers and may have a better case for optional federal chartering.
The second level was within the p-c industry, with some p-c representatives saying that the change in chartering is necessary for the future competitiveness of the industry, and others insisting that it could make insurance regulation even more burdensome and expensive.
Joseph J. Gasper, president of Columbus, Ohio-based Nationwide Financial Services and chairman of the Washington-based American Council of Life Insurers, called the current state regulatory system, a "competitive albatross."
He noted that the system was designed when the life insurance industry was much different than it is today. Life insurers, Mr. Gasper said, no longer focus simply on traditional life insurance products.
The business today, he said, is about retirement security and long-term savings. In addition to competing against each other, Mr. Gasper said, life insurers must also compete against banks, mutual funds and securities firms.
Unfortunately, he said, these competitors have an advantage over life insurers in that they can develop products and bring them to market quickly. But life insurers, Mr. Gasper said, may have to wait 18 months or more to get approval for new products from all jurisdictions.
And even then, he said, local variations may force life insurers to tweak a new product in a way that effectively transforms it from a single, national product to 30 or more different products.
"The current system is not designed to accommodate national companies, and it doesn't," Mr. Gasper said.
Tony Nicely, chairman of Washington, D.C.-based GEICO, said he understands Mr. Gasper's concerns.
Mr. Nicely, who spoke on behalf of the Des Plaines, Ill.-based National Association of Independent Insurers, said that while he could not speak for NAII on the issue of establishing a life insurance-only federal charter, he personally would not oppose it.
But he does oppose establishing optional federal chartering for p-c insurers, he said.
While acknowledging that the state system needs reform, Mr. Nicely said that federal chartering would have severe consequences for p-c insurers.
To read Mr. Brostoff's full report see the June 17 print edition of National Underwriter.
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