Federal Insurance Regulation Bill Introduced

The legislation would establish a five-member Federal Insurance Commission housed at the Commerce Department that would establish licensing and financial standards for the insurance industry, regulate rates and policies, oversee solvency, investigate market conduct, and establish accounting standards.

The McCarran-Ferguson antitrust immunity would be repealed under the legislation, which is called the Insurance Consumer Protection Act.

The new system would not be optional. All insurance companies that engage in interstate business would come under the authority of the Federal Insurance Commission.

Only insurance companies that do business solely in the state in which they are domiciled would be state regulated.

The Commission would regulate all lines of insurance, including property-casualty and life.

In addition to the Commission, the legislation would establish a Federal Guaranty Corporation that would liquidate insolvent companies and pay claims to affected policyholders.

The legislation would also set up an independent office within the Commission to receive complaints from consumers about improper industry practices and to represent consumers before the Commission.

Consumers would have the right to challenge rate applications filed by insurance companies.

In a statement on the floor of the Senate, Sen. Hollings linked his legislation to efforts to enact tort reform.

Trial lawyers, he said, are really doing a "wonderful service."

"The onslaught has got to be stopped here on this so-called tort reform because it is totally political," Sen. Hollings said.

"It is totally campaign funds," he said. "It is totally the election next year and not the needs of the country."

He said that in medical malpractice, 1999 data shows that profits as a percentage of premiums are nearly twice as high as for p-c coverage.

"Recent price increases are merely an attempt by the insurance industry to maintain the extremely high level of profitability for malpractice coverage," Sen. Hollings said.

Robert Rusbuldt, chief executive officer of the Alexandria, Va.-based Independent Insurance Agents and Brokers of America, said his association is totally opposed to the Hollings bill.

"It is not based on marketplace reality," Mr. Rusbuldt said. "We will fight it every step of the way."

Mr. Rusbuldt added that he does not think the legislation has much chance of enactment in the near future. Rather, he said, he believes Sen. Hollings introduced the legislation because he wants to send a message to the insurance industry.

The legislation does represent a warning to the industry, Mr. Rusbuldt added. There is a slippery slope when dealing with Congress on regulatory issues like this.

The insurance industry, he said, needs to approach its drive for insurance regulatory reform very carefully.