Insurers Assess IIAA Regulation Plan
Washington
Both supporters and opponents of optional federal chartering are reacting cautiously to the decision by the Independent Insurance Agents of America to seek federal legislation that would help streamline insurance regulation but keep it exclusively state-based.
The IIAAs board last month approved a new policy statement calling for the use of "federal legislative tools" to help reform the state regulatory system, while maintaining the full authority of the states to regulate insurance. (For details, see last week's edition, page 5.)
In general, insurance company representatives said they want to see more specifics on what type of legislation the Alexandria, Va.-based IIAA will pursue.
"We choose to view this as a positive," said Leigh Ann Pusey, senior vice president of federal affairs for the Washington-based American Insurance Association, which supports optional federal chartering.
Even though IIAA opposes optional federal chartering, Ms. Pusey said, it is a significant and positive development that IIAA sees a legitimate federal role in the effort to modernize insurance regulation.
But she added that the IIAA approach is more conceptual than specific. Moreover, Ms. Pusey said, about two years ago, AIA also examined federal minimum standards as a way to achieve regulatory reform, but was faced with constitutional and other questions.
For example, she said, regulators might agree to uniform standards but they might not be able to enforce them. That, Ms. Pusey said, is why AIA turned to optional federal chartering.
Nonetheless, she said, it is helpful to have IIAA engaged in the debate rather than just being a naysayer.
Roger Schmelzer, vice president of federal affairs for the Indianapolis-based National Association of Mutual Insurance Companies, which opposes optional federal chartering, said that IIAA has an interesting concept, but it is not quite ripe yet.
But Mr. Schmelzer said he still believes the key is getting state legislatures to enact regulatory modernization. He believes, he said, that the motivation is there.
With federal legislation, Mr. Schmelzer said, there are dangers. The industry, he said, cannot just go to Congress with a bill and expect that what the industry asks for is what it will get.
Carl Parks, senior vice president of federal affairs with the Des Plaines, Ill.-based National Association of Independent Insurers, said that NAII would agree with a lot of what the agents say about the need to reform regulation. However, he said, NAII believes that at this time, it is better to focus on state-based reform efforts. Mr. Parks said that he does not feel that the states have been given adequate time to achieve reform.
He also agreed with Mr. Schmelzer that oftentimes with federal action, the industry gets a lot more than it requests.
The key, Mr. Parks said, is focusing on state reforms–perhaps using Congressional mechanisms, such as hearings and oversight, to encourage states to stay on the reform track.
Deborah Sherno, a representative of the Alliance of American Insurers in Downers Grove, Ill., said that seeking federal action and oversight of state regulation is premature. The states, she said, should be given a full opportunity to implement reforms. The states have done a good job so far, Ms. Sherno said, and the Alliance believes they will continue to step up to the challenge.
Rather than considering federal oversight of state regulation, Ms. Sherno added, the primary focus in Congress should be on the immediate need to stabilize the terrorism reinsurance market.
Reproduced from National Underwriter Property & Casualty/Risk & Benefits Management Edition, February 4, 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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